Banks make profit and escape accountability

Lebanon has been going through an unprecedented economic crisis whereby small-to-medium bank deposits were lost and people have witnessed both wage devaluation and inaccessibility to social services. 

With the Lebanese Lira losing over 98 percent of its value, the country’s economy is becoming increasingly dollarized.

Amid such developments, talks about dealing with the country’s financial losses have witnessed increasingly heated debates. On one hand, people are pointing to the banks as primary culprits behind the current economic state of affairs. 

On the other hand, a group of politicians and political groups – mostly belonging to the traditional ruling class – have pushed to absolve banks from their responsibilities and exempt them for dealing with current economic burdens such as the file of financial losses.

Back to Profitability

Contrary to public intuition, the Lebanese banks have indeed gone back to record net profits in their accounting sheets. 

Following the 2019 uprising, most banks reported losses and were exempted from contributing to building financial reserves as per Central Bank circulars.

As such, this represents a new episode whereby the ruling class has occupied a central position in advocating for banking sector shareholders and providing a cover for their schemes.

On the opposite hand, depositors owning small-to-medium amounts in banks continue to struggle to collect their money. 

More recently, Internal Security Forces prevented a holdup at a branch of the Arab Finance House in Beirut, whereby depositor Hussein Hassan Saado broke in with his wife unarmed in an attempt to secure their $40,000. According to The Depositors’ Cry, a group whose X (formerly known as Twitter) bio claims to be focused on defending depositors, Saado has since been detained.

Political Parties’ Suggestions to Deal with the Losses

While political parties have varied in their proposals for dealing with losses in the financial sector, they mostly agree on one overarching principle: to turn these losses from burdens on the banks, to burdens on Lebanese public institutions and accordingly public funds.

Both the blocs of MP Ibrahim Kanaan and MP George Adwan, who recently announced the failure to reach an agreement with the International Monetary Fund, have supported using public funds to deal with the losses, through the proposed consideration of bank deposits as public debts.

Similarly, MP Gebran Bassal has proposed the establishment of a trust fund for analogous purposes. On his part, Judge Fadi Elias from the State Shoura Council proposed setting up two bodies appointed by the Council of Ministers to manage public assets and conduct a global public bidding for the assets – a proposal that was adopted by the Amal Movement.

Economist Ali Noureddine explains that by turning financial losses – which amount to several times the size of the Lebanese economy – into public debts, the state and the economy are both bound to fail and remain far from rejuvenating, not to mention losing the potential to pay back the deposits.

The current economic pathway adopted by authorities is heading towards a “lost decennium”, according to Noureddine, whereby the country’s population witnesses a freefall with no path for financial correction.