Karim Said is preparing an official visit to the United States later in November, with planned consultations with the US Treasury, the International Monetary Fund and financial crime agencies. The Governor of the Bank of Lebanon informed President Joseph Aoun on Thursday, November 5. Displacement occurs as discussions on bank recovery and deposit return continue. Their credibility will be played on an issue that international meetings cannot resolve in the place of the Lebanese authorities: who will bear the losses, and in what order?
According toreport of the National Information AgencyJoseph Aoun and Karim Said discussed monetary policy, financial stability and consultations with the government, IMF and commercial banks on the draft law on financial stability and deposit recovery. The Governor also presented his recent discussions in Paris with the Bank of France and his participation in G7 discussions on terrorist financing and financial integrity.
No specific dates were announced for the U.S. trip. The communiqué does not mention a final agreement with the IMF, unfrozen financing, or a timetable for the repayment of savers. The stated aim is to restore international confidence and fully reintegrate the global financial system.
External confidence requires credible accounts
Financial compliance and the fight against illicit channels are important for Lebanese banks’ relations with their foreign partners. However, they alone do not determine the value of assets or the capacity of institutions to return deposits. A bank can improve its procedures without having settled its balance sheet deficit. Travel should therefore be valued on both sides, without confusing diplomatic recognition with financial consolidation.
For depositors, the useful result would be a documented advance on losses, liabilities and means of payment. Expressions of confidence remain difficult to assess until the rules of allocation allow the calculation of what a saver will actually recover, at what time and with what guarantees.
IMF puts shareholders ahead of depositors
The IMF’s public position provides a clear criterion for judging Lebanese proposals. In itspress release of 18 septemberThe Fund requested that future law respect the hierarchy of claims: depositors must not bear losses before shareholders and lower-ranking creditors. It also linked repayment modalities to bank viability and public debt sustainability.
This requirement directly tests any formula that would preserve bank capital while at the outset imposing a reduction in deposits. It is not an IMF promise to repay all accounts in full. It requires first looking at the resources and losses of the establishments, as well as the legal ranks concerned, before seeking savings from the customers.
The disagreement cannot therefore be reduced to an opposition between a « severe » Fund and authorities concerned with protecting applicants. A proposal is also judged by those whom it protects first. If owners retain economic value while customers absorb the deficit, the justification must be exposed and confronted with this hierarchy, bank by bank.
BDL needs to clarify its own part
The Bank of Lebanon participates in the discussions as a monetary authority, while taking a central place in the bank’s balance sheet claims. The assessment of what can be recovered from it therefore influences the calculation of the sector’s losses. This position makes it particularly necessary to have a transparent, independently verifiable method, rather than an amount fixed by compromise between institutions.
Restitution of deposits involves distinguishing between losses from commercial banks, central bank liabilities and government bonds. Grouping these positions under a general formula of « collective responsibility » may mask the contribution actually requested from each actor. The applicant cannot be the only one to know immediately the cost of the reform, while the other contributions remain conditional.
However, the BDL’s criticism must be based on its actions and the available texts. The minutes of the meeting with Joseph Aoun do not release any new distribution keys. It would therefore be abusive to award him, on that basis alone, a secret agreement with the banks or a haircut now agreed upon.
Previous withdrawals give a first concrete test
However, the preambles to Intermediate Circulars 780 and 781, dated 3 November, show a point on which the BDL intends to weigh. They request that the amounts already paid under the circulars be taken into account in the calculation of future cash payments under the expected deposit law. This approach, discussed inour analysis of the new circulars, is presented on behalf of fairness and the absence of double counting.
Avoiding paying twice the same amount is understandable. The calculation becomes questionable if it equates an amount debited from a dollar account with a full refund while the client received books at a heavily degraded value. Any adjustment must distinguish between the accounting debit, the currency actually received and its value at the time of payment. Without a verifiable record for each applicant, the rule could devote a loss already incurred rather than measure it.
These preambles are not sufficient to set the content of the future law. However, they show why monitoring methods is as important as announcing a ceiling or a deadline. The refund will depend on the definition of the refundable amount, not just the figure shown in the political declarations.
The taxpayer cannot serve as an adjustment variable
A possible public contribution must be considered with its consequences: additional debt, earmarked revenue or resources withdrawn from other expenditure. The IMF’s principle of sustainability prohibits the State from being considered an unlimited reserve. Putting a burden on the budget moves its cost towards taxpayers and users of public services, many of whom do not have large deposits.
For their part, banks must present what their shareholders can absorb and the new capital they are willing to commit. Their return to normal activity cannot be based exclusively on prolonged restrictions imposed on former customers. Remediation also involves determining which facilities are viable and how to treat others, within a legal framework that respects the rights of everyone.
What US consultations should specify
Expectations focus on documents: a coherent assessment of losses, contribution and recapitalisation rules, and then realistic financing and timing of refunds. Any challenge must be subject to public criteria. Suspicion of certain transactions does not allow an illegitimate category of deposits to be declared indiscriminately.
During hispress briefing on 1 octoberThe IMF had recalled several conditions for reaching a technical agreement: an effective banking resolution framework, an appropriate law on the financial deficit, a sustainable budget and fiscal path, and progress in governance. The number of meetings does not replace the implementation of these commitments.
Karim Said’s visit will provide an opportunity to clarify disagreements and next steps. In order to convince beyond the institutional interlocutors, the BDL will have to make the required share readable to banks, their owners, the state and itself. It is on this condition that the return of trust may also concern customers whose money remains immobilized.
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