The government is expected to complete tomorrow in a session held at the Presidential Palace the discussion of the provisions of the draft financial regulation and deposit recovery law, known as the “Financial Gap Law.”
“Al-Sharq Al-Awsat” wrote: The Governor of the Bank of Lebanon, Karim Saeed, summarized the political or sectoral dispute accompanying the Cabinet’s discussions on the deposit recovery law (“financial gap”) with a written recommendation requesting that it be subjected to “a thorough, comprehensive and constructive review, aimed at introducing the necessary improvements and fortifications to ensure justice, credibility and practical applicability, before submitting it to Parliament.”
Based on this conclusion presented by Saeed, before traveling on a working visit outside Lebanon, ministerial interventions are expected to intensify in the third session to complete the discussion of the project scheduled for Friday, considering that the central bank is the main reference that the proposed law defines, to inject and manage cash payment operations in favor of depositors, and authorized to issue alternative and guaranteed bonds for savings categories exceeding one hundred thousand dollars.
In the context of the project’s goal of maintaining financial stability, the Governor announced “serious reservations, based on well-established legal principles, accepted accounting standards, and international precedents, regarding any approach that would lead to the systematic depletion or complete cancellation of banks’ private capital before removing irregular claims from their balance sheets, and before the subsequent application of the order of claims.”
He confirmed that under the terms of the draft law, “commercial banks are partners in the framework of deposit repayment and constitute the main engine of credit intermediation necessary to achieve economic recovery. Therefore, any solution that leads to the systematic elimination of banks’ capital would harm depositors, undermine the prospects for economic recovery, and deepen the expansion of the informal cash economy.”
According to an analysis by a concerned financial official contacted by “Al-Sharq Al-Awsat”, it seems that the beginning of the project with the executive authority is not only “unsafe”, but is likely to become “inapplicable”, due to the legal and procedural loopholes and defects that plague it, including the description of the basis of the crisis that led to the financial and monetary collapses, and the explicit ambiguity in determining the responsibility of successive governments in the uncontrolled spending and withdrawal of open financing from the central bank’s budget through banks’ investments with it, most of which goes back to depositors.
It is noteworthy in this context, the near-random variation in estimates regarding the activation of the project’s articles and the “cleaning” operations of the required digital restrictions on both sides of assets and liabilities (assets and liabilities) at the central bank and banks alike, despite the prior consensus on classifying them as basic data to determine the final size of the gap, and thus derive the sound means of distributing responsibilities and burdens to bridge it within the appropriate capabilities and durations, between the state, the central bank and the banks, which constitutes the effective solution to end the suffering of depositors and be satisfied with what they have incurred from heavy losses during the past six years.
Ayash: People’s money evaporated
“Al-Anbaa Al-Kuwaitiya” asked the former Deputy Governor of the Bank of Lebanon, Ghassan Ayash, about his opinion on the draft law being discussed by the government, and he said: “The law under study is not a law to restore deposits, as there is no law that can restore deposits because people’s money in banks has evaporated.” He added: “This law is only intended to distribute losses between banks, the central bank and depositors, without burdening the state based on a decision by the International Monetary Fund, and it provides for the return of funds to depositors that are less than their original funds.”
Regarding what can be improved in the project by adding amendments to it to make it more equitable, Dr. Ayash answered: “The only possible improvement is to amend the ratios of participation in losses between the state, the Bank of Lebanon, and depositors, but there is nothing that raises the percentage of depositors recovering their money. I believe that Parliament will receive the law with a storm of discussions and debates, and the discussion will take a long time.”
He concluded by saying: “Whenever the deputies feel that the parliamentary elections are in place, they will bid more and the debate will be populist, but in the end the law will be amended and passed.”
