The International Monetary Fund welcomed Thursday, 20 August, the adoption by the Lebanese Parliament of amendments to the Bank Restructuring Act, a reform that it had been demanding for several months. In a message to Finance Minister Yassine Jaber, IMF Head of Mission for Lebanon, Ernesto Ramirez Rigo, described the vote as « very good. » The Fund is scheduled to resume its meetings in Beirut in mid-September. This satisfaction marks progress in the negotiations, but does not mean that the financial dispute is settled: the IMF continues to expect a credible mechanism for the allocation of losses, the protection of depositors and a restructuring capable of making banks viable without compromising public finances.
After several months of sometimes difficult discussions between the government, the Parliament, the Bank of Lebanon and the International Monetary Fund, the adoption of the law on bank restructuring provides Beirut with a first result that could revive negotiations with the international institution.
Ernesto Ramirez Rigo congratulated Yassine Jaber on the adoption of the text, believing that it reflected Lebanon’s willingness to bring its legal framework closer to international best practices. The message is important after the IMF’s criticism of previous versions of legislation and changes to the draft during its parliamentary career.
However, it must be read with precision. The Fund welcomes the legislation adopted and the changes made to the banking resolution mechanism. However, it does not validate the entire Lebanese strategy for the treatment of losses accumulated since 2019. This second issue remains at the centre of discussions on financial recovery and progressive repayment of deposits.
IMF welcomes law after months of criticism
The change of tone is notable. In September 2025, following the adoption of the first Banking Resolution Act, the IMF recognized the efforts made but felt that the text needed further improvement in order to fully comply with international standards.
In particular, the institution requested a banking resolution mechanismindependent, transparent and effective. It also stressed the need to clearly define the responsibilities of the various authorities responsible for deciding whether to restructure or wind up a bank.
These reservations led the government to prepare new amendments. The text was then discussed at length in Parliament, particularly in the Finance and Budget Committee.
One of the main debates concerned the Bank of Lebanon and the High Banking Commission. The IMF wanted to prevent restructuring of the sector from being carried out by institutions whose independence or responsibilities would be insufficiently defined.
The Fund was also interested in the governance of the resolution mechanism, the potential for the banking sector to influence decisions and the division of powers between the Governor, the Central Council of the Bank of Lebanon and the High Banking Commission.
The parliamentary vote comes after several amendments designed to respond to these objections.
A law to decide the fate of banks
The law must provide the framework for determining which banks can continue to operate, which must be recapitalized, restructured, merged or, as a last resort, liquidated.
This step is essential after more than six years of financial crisis.
Since 2019, the Lebanese banking system has been operating without the overall resolution of accumulated losses. Depositors have lost normal access to much of their economies, while administrative mechanisms and circulars of the Bank of Lebanon have gradually organized limited withdrawals.
The restructuring must make it possible to escape this exceptional regime.
In particular, the new legislation strengthens the framework applicable to banks in difficulty and clarifies the role of the authorities responsible for examining their situation. It should allow institutional evaluations by institution rather than treating the whole sector as if it had the same financial situation.
This distinction is fundamental. Some banks may have more assets or capital than others. The responsibilities of their shareholders are not identical and their losses must be assessed separately.
The vote on the text therefore creates the procedure. It does not yet provide the necessary resources alone to compensate for the losses.
The most difficult issue remains loss
This is where the IMF’s satisfaction finds its main limit.
In February, a mission led by Ernesto Ramirez Rigo clearly recalled the principles that the Fund considers essential in Lebanon’s financial strategy. The first concerns thehierarchy of creditors.
According to this logic, losses must first be borne by the shareholders and classes of creditors placed behind the depositors in this hierarchy. Depositors must not absorb losses before shareholders or subordinate creditors.
This issue is particularly sensitive in Lebanon because of the large financial gap between the State, the Bank of Lebanon and commercial banks.
The IMF therefore calls for recognition of losses before they are distributed. It also wants the strategy to take into account the liquidity actually available in the system.
A mechanism promising depositors repayments that the State, the Bank of Lebanon and commercial establishments would be unable to finance would not solve the crisis. He would move it in time.
What the IMF criticized in previous versions
The Fund’s comments on the project covered several specific issues.
The first concernedindependence of the High Banking Commission, to play a central role in decisions concerning banks in difficulty. The IMF wanted its composition and functioning to limit the risk of conflicts of interest and influence of those directly involved in restructuring.
The second concerned the distribution of powers with the Bank of Lebanon. The various versions examined in Parliament generated debate on the powers of the Governor, the Central Council and the High Banking Commission. For the IMF, the procedure should clearly identify who decides, according to what criteria and with what control possibilities.
The third concerned the protection of applicants in each institution. The Fund had criticized some approaches to aggregate the accounts of the same depositor in several banks. According to its technical observations, a resolution must respect the rank of each claim at the level of the institution concerned in order not to place certain applicants in a less favourable position than that provided for by international principles.
Finally, the IMF emphasized the mechanisms for dealing with shareholders of failing banks. Restructuring should not allow owners of an insolvent establishment to preserve their capital at the expense of depositors.
The positive message this week indicates that the text finally adopted has made sufficient progress on these issues to be considered an important step forward. However, it will be necessary to await its implementation in order to determine whether the mechanisms are functioning effectively as planned.
The Bank Act is not the Deposit Act
The distinction is essential for applicants.
The Banking Resolution Act primarily addresses the question:what about a bank that is no longer viable?
It does not fully answer a second question:who will bear the tens of billions of dollars of accumulated losses and according to what schedule will depositors recover their money?
In particular, this second dossier is part of the strategy of financial stabilization and recovery of deposits, often referred to in Lebanon as the « financial gap ».
In February, the IMF qualified the government project on financial stabilization and recovery of first-stage deposits. But he immediately requested improvements to bring it into line with international principles.
The Fund places particular emphasis on protecting small depositors and respecting the loss hierarchy.
It also calls for the possible State contribution to remain compatible with the sustainability of the public debt. In other words, resolving the banking crisis by transferring an impossible bill to the state budget would not be considered a viable solution.
Who must pay remains the heart of the conflict
Behind the technical formulations is the question that divides Lebanese economic policy since 2019: how can the losses be distributed between the State, the Bank of Lebanon, commercial banks, their shareholders and depositors?
IMF rejects an approach in which losses are hidden or deferred without recognition.
Its principles imply that shareholders absorb losses before depositors. Banks must also be assessed individually to determine their actual ability to contribute to the recovery.
At the same time, the Fund aims to prevent massive recapitalisation financed by the State from turning bank losses into unsustainable new public debt.
This position has been in conflict for several years. In particular, banks are challenging the scenarios that would allow them to bear a share that they consider excessive losses, while depositors refuse to use their assets to pay off the crisis.
The Bank of Lebanon itself has debt and liabilities, the treatment of which will have a decisive influence on the final division.
The law adopted therefore does not eliminate this conflict. It provides a mechanism for determining the situation of establishments. Sharing the bill remains the central economic problem.
Implementation will be the next test
The IMF does not only judge reform upon its adoption. Enforcement will now be reviewed.
The High Banking Commission must have sufficient independence to take decisions that may affect powerful institutions. Evaluations must be credible. Assets and liabilities must be established in a sufficiently transparent manner to determine the real viability of the banks.
It will also be necessary to prevent the use of restructuring mechanisms to preserve certain shareholders or move losses to depositors.
This phase will be politically more difficult than passing a law.
Adopting a text creates general rules. Applying means deciding that a bank must be recapitalised, merged or liquidated. It also means determining the value of its assets and how much its shareholders can lose.
The IMF will therefore particularly monitor how new skills will be used.
Mid-September, negotiations to resume in Beirut
The message to Yassine Jaber also contains a deadline. Ernesto Ramirez Rigo said IMF will resume meetings in Beirutmid-september.
This mission will be the first diplomatic test after the adoption of the amendments.
Lebanon could present concrete legislative progress. The IMF, for its part, will be able to examine the conformity of the final text, its implementation mechanism and the progress of other necessary reforms.
The discussion will therefore not focus solely on bank restructuring. The Fund also calls for a medium-term budgetary framework, a strategy compatible with debt sustainability and a credible mechanism to deal with losses.
In February, he had also stressed the need to mobilize more public revenues without compromising the social needs and investments necessary for reconstruction.
The banking reform thus belongs to a broader package. For the IMF, a viable banking sector cannot be rebuilt sustainably if the state remains in an unsustainable financial situation.
A positive signal, not yet an agreement with the IMF
The reaction of Ernesto Ramirez Rigo gives the government of Nawaf Salam an important argument. After years in which Lebanon’s reform commitments have often been delayed or emptied of their substance, this time the IMF publicly recognizes progress.
For the Ministry of Finance, the vote also shows that Parliament can transform reform commitments into applicable legislation. Yassine Jaber presents the law as a component of a broader process to rebuild a banking sector capable of financing the economy again.
But the path between this message of congratulations and a financial programme with the Fund remains important.
Lebanon must now apply the law, determine the real situation of each bank, make progress on loss-sharing and show that the solution chosen protects depositors without creating a new public debt that cannot be financed.
The September meeting will focus on whether Parliament’s vote resolved the IMF’s technical objections or whether it only allowed for one of the many stages in the matter. After six years of banking crisis, the decisive question remains: the new legal architecture must now show how it transforms accumulated losses into an effective financial solution.
