Collapse on Who: Unjust bank procedures face resistance

Protesters are fighting back against the collusion of Central Bank and the Lebanese authorities with bankers at the expense of the majority of the population.

Protesters gather near Central Bank on December 30, 2019. (Farah Baba) Banks
Protesters gather near Central Bank on December 30, 2019. (Farah Baba)

“We aren’t paying the debt,” chanted students and workers in a demonstration held on December 30 in front of Beirut’s Central Bank. 

The demonstration, launched by several campaigns and groups, targeted the informal capital control and withdrawal limits set by commercial banks and how Central Bank and the Lebanese authorities have colluded with bankers at the expense of the majority of the population.

“Why are youth groups at the forefront of such causes? It’s simply because the weakest groups are the ones most harmed by these crises,” said Amar Sleiman, a member of the Mada Youth Network and an organizer of the “Collapse on Who?” campaign behind the demonstration. “These groups include, alongside small depositors, the students.”

“Students are held hostage by the banks and their indiscriminate procedures on one hand, and by the private universities which have dollarized their tuition fees on another,” continued Sleiman. 

Failed measures in a failed Lebanese economy

Commercial banks have imposed certain capital control procedures that have manifested mostly with middle and lower income families and wage earners. 

For the past eight to nine years, the Lebanese economy’s Balance of Payments has been recording recurrent deficits in the context of less remittances entering the economy. The BoP “registered a deficit of $3.3B by April 2019, up from the $773M deficit by April 2018” according to Central Bank.

Normally classified as a rentier economy, Lebanon’s main sectors range from real estate to banking, with little investments committed to more export-oriented productive sectors. 

The byproduct of such an arrangement, particularly with a rising debt-to-GDP ratio, is a consumerist import-based economy largely dependent on exchange rate stability and cash inflows from the rest of the region and Lebanese families residing abroad. 

Noting last month’s World Bank report emphasizing Balance of Payments pressures, the events involving the closure of commercial banks and inconsistent capital control procedures in the post-October 17 context have worsened the situation.

With reduced confidence in the political order, and rising skepticism vis-à-vis the exchange rate and the Lira’s valuation, commercial banks have imposed certain capital control procedures that have manifested mostly with middle and lower income families and wage earners. 

Due to low liquidity and deposit investments in BDL accounts, commercial banks are facing a big issue with allowing withdrawals. Some have imposed a limit as low as $100 a week.

Such strict restrictions on capital withdrawals are being implemented despite capital flights since the beginning of the crisis, said to amount to around 3 billion dollars to be investigated by the Central Bank according to an intervention by the governor on December 26.

The grim and unfair reality facing consumers, wage earners and small depositors has opened the door for many forms of resistance.

Protesters are fighting back in different ways

Forms of protest ranged from directly crushing ATMs to open statements and blockades forcing banks to shut down.

The student-led protest on December 30, 2019 highlighted the procedures that should be implemented to protect Lebanon's most vulnerable social groups from the implications of the crisis. (Farah Baba) - Banks article
The protest on December 30, 2019 was organized by multiple youth and opposition groups and raised several demands under a campaign titled “Collapse on Who?”. (Farah Baba)

Prior to any form of concrete organization on the level of campaign demands, resistant and contentious interactions persisted between middle and low income depositors and the administrators of commercial banks.
Throughout the course of the October 17 revolution, as a reaction to recurrent capital restrictions, banking closures and security violence, certain individual demonstrators vandalized several bank entries.

Bank Med, partly owned by the family of former Prime Minister Saad Hariri, recurrently faced such pressures after the spread of statements suggesting hefty profits made by the bank via debt service payments and relatively recent financial engineering schemes.

As a reaction to the inability to withdraw salaries directly transferred to the customer’s corresponding bank accounts, forms of protest ranged from directly crushing ATMs to open statements and blockades forcing banks to shut down.

While some banks feared further escalation, succumbed to the demands of some protesters and loosened particular restrictions, others have responded to demonstrators with excess force

Overall, none of these procedures stimulated a response by the Lebanese authorities. Activists felt the need to take matters in their own hands.

Multiple grassroots campaigns are forming 

The statement released by the campaign insisted that the economic system in place is “incompetent and incapable of sustainability.” 

“Where did the transfers go?” asked one of the posters raised in the demonstration held yesterday. The protest, organized by several youth and opposition groups, raised several demands under a campaign titled “Collapse on Who?”.

The campaign sought to highlight various procedures that ought to be implemented to protect the country’s most vulnerable social groups from the implications of the crisis.

The demands emphasized by the campaign included implementing more socially just capital control procedures, returning profits made via financial engineering schemes, negotiating the national debt, ensuring enough cash for student loans, and investigating suspiciously large money transfers outside the country.

“The government and the Central Bank need to step in; it’s outrageous that they are just on the sidelines watching,” says Jad Hani, an active student from the American University of Beirut.

In addition to these demands, the statement released by the campaign insisted that the economic system in place is “incompetent and incapable of sustainability.” 

The statement further strongly accused the Central Bank of “not taking any measures to protect small depositors from losing their money.”

Another campaign titled “We Aren’t Paying” involved more direct action. Initiated by individuals who have taken loans from commercial banks related to residency, transportation or education, the project revolved around refraining from paying back any of the bank loans until the cancellation of interest payments for lenders who have already paid half of their loans.

The rationale behind the campaign is that services such as housing, transportation and education should largely be provided by the state and funded by tax payments. 

However, in the absence of such services due to the prevalence of a clientalist and unproductive public sector, the banks have benefitted from extending their loaning services to such commodities and embarked on large profits. 

Despite the existence of numerous and diverse social groups mobilizing on the ground, they share a common persuasive perception that their wealth has been systematically transferred to the top one percent of the population.

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