According to available information about this project, the largest burden of distributing losses will fall on the state and the central bank, while the contribution of banks will be partial, in exchange for not imposing any burden on depositors, except for what is proven by audit and investigation to be the result of transfers or illegal benefits. Sources familiar with the project expressed surprise at the skepticism surrounding it, considering it an attempt based on sound legal grounds and economically fair principles to address the systemic crisis facing Lebanon since October 17, 2019. They say that it is based on solid legal and constitutional foundations, built on the principle of the general economic system, which allows the state, in cases of national disasters, to issue exceptional legislation, provided that it is limited in time, proportionate, and directed to achieve the public interest, without any particular party benefiting at the expense of others, in order to correct imbalances and inequalities that have emerged during or because of the crisis.
It believes that the comprehensive crisis requires the distribution of financial responsibilities among all parties: the state, the Banque du Liban, and commercial banks, with the exception of depositors, who are considered the real victims of this financial disaster. It affirms that the essential measure lies in eliminating the deficits in the Banque du Liban’s budget by clearing irregular claims (excess interest, conversion of deposits in lira to dollars nominally or in bookkeeping, and accounts that lack evidence of the source of funds). The banking sector is also subject to a qualitative asset review (AQR) to determine the level of capital deterioration in each bank separately.
Regardless of the results, all commercial banks are required to recapitalize themselves within five years, and then contribute to the repayment of deposits alongside the state and the Banque du Liban, but the contribution, according to the project, will be partial.
The sources add that depositors’ accounts will be divided into small, medium, and large depositors, and an amount of $100,000 US dollars will be paid to each depositor over several years in annual installments, provided that the remaining balance is repaid through the exchange of deposits for asset-backed securities (ABS) issued by the Banque du Liban and repaid according to different terms extending to 10, 15, and 20 years.
Faced with the fear in some circles that the conclusion of the project is to indirectly burden depositors with the largest part, and that the state will bear little, the sources confirm that those who hold this view should realize that the other options that allow the state to increase its contribution to bearing losses would be through resorting to privatization, or emptying dead assets, or gold and using the proceeds to repay deposits. These options do not enjoy a national consensus at present, which means that the central bank, according to the project, will be the party that will bear the largest burden, estimated at about 60 percent of the cash repayment and 80 percent of the asset-backed securities. As for the banks, they will be obliged to recapitalize and restore financial solvency, and contribute to the repayment of 40 percent of the cash part and 20 percent of the bonds.
