Bank deposits: confidence remains absent
The decline inbank depositslebanon recalls that the financial crisis is not closed. Behind the apparent stability of the pound and some more favourable market signals, banks continue to lose some of the resources that should form the normal basis of credit and confidence. The latest available monetary data show a further contraction in residents’ bank deposits over the week ended 21 May 2026. The movement was nothing unusual. It confirms that households and businesses remain cautious, that currencies still leave the system and that deposits in books do not reflect a real return to bank savings.
According to the aggregates published by the Bank of Lebanon and taken over by Bank Audi, residents’ bank deposits fell by £2,710 billion over the week. This decrease is mainly due to a decrease in foreign currency deposits, which fell by £4,072 billion, or $45.5 million at the official rate of £89,500. At the same time, book deposits increased by £1,363 billion. But this local increase must be interpreted with caution. It is mainly due to an increase in demand deposits, while savings deposits in books are declining.
Distinction is essential. A sight deposit may reflect cash flows, pending payments, wages, company settlements or temporary liquidity. It does not necessarily mean that depositors return to banks with lasting confidence. A savings deposit, on the other hand, expresses a greater willingness to keep funds in the system. However, savings deposits in books fell by £538 billion over the period. The signal sent by the figures is therefore clear: the Lebanese banking system remains a passageway, more than a place for saving.
The currency signal
The most worrying detail concerns foreign currency deposits. Their weekly decline is equivalent to $45.5 million at the official rate. This amount may seem limited in view of the scale of the banking crisis, but it prolongs a heavy trend. In a country where dollarization has long structured savings, the decline in foreign currency deposits indicates that economic agents prefer to keep their liquidity outside the banking system, use it directly or transfer it to safer forms in their eyes. The bank no longer plays its traditional role as a safe, lender and intermediary.
This loss of confidence has known roots. Since the collapse of 2019, depositors have suffered restrictions, loss of value and prolonged uncertainty about the fate of their accounts. Bank restructuring has not been completed. The allocation of losses was not clearly assumed. The withdrawal rules have long been modified by circulars, banking practices or ad hoc arrangements. Under these conditions, an applicant receiving foreign currency has no obvious reason to place them in the system for a long time. He may prefer to keep them in cash, use them to pay for his needs or transfer them as soon as possible.
The decline in foreign currency deposits also affects banks’ ability to become normal economic players again. A bank collects deposits, converts part of these resources into loans and finances the activity. In Lebanon, this chain remains broken. Banks do not have sufficient confidence to attract new long-term savings. They also do not have a sound balance sheet allowing them to lend widely. The contraction of foreign currency deposits thus confirms an economy without genuine banking intermediation.
Numbers of the week
| Indicator | Change or level |
|---|---|
| Monetary week observed | Close May 21, 2026 |
| Total bank deposits of residents | £2,710 billion |
| Resident deposits in foreign currencies | £4,072 billion |
| Currency equivalent | -$45.5 million |
| Resident deposits in books | +1 363 billion pounds |
| Cash deposits in books | +1 901 billion pounds |
| Savings deposits in books | £538 billion |
| Money supply M4 | -£3,508 billion |
| Currency in circulation | £791 billion |
| Non-bank treasury bill portfolio | £8 billion |
| Overnight rate non cash | 25% to 20% |
The table shows a banking system that does not yet find a sound structure. The increase in book deposits is not sufficient to offset the decline in foreign currency deposits. The increase in demand deposits does not compensate for the weakness of savings. The contraction of the M4 money supply shows a wider decline in liquidity in the broad sense. This money supply decreased by £3,508 billion over the period, reflecting a decline in the currency in circulation and a slight decline in the portfolio of Treasury bills held by the non-bank sector.
The reduction in the non-cash overnight rate from 25% to 20% gives another signal. It suggests relatively more liquidity in books on the money market. But this signal is limited by its very nature. It is a non-cash rate, in a system where markets still operate with strong constraints and where bank liquidity does not automatically translate into credit to the economy. A reduction in rates between banks does not mean that companies will return to normal access to financing tomorrow. It only indicates that short-term tension has been reduced in a particular segment.
Monetary stability that is not enough
The exchange rate stability around £89,600 to £89,700 per dollar in the parallel market can give the impression of a calmed system. This impression is misleading if isolated from deposits. A currency can remain stable as deposits decline, banks weaken and the real economy lacks credit. Lebanon has been living in this dissociation for several years. The exchange rate has become the most monitored political indicator. But he doesn’t say everything. It does not measure banking confidence, financial depth or the ability of the economy to invest.
The contraction of bank deposits recalls that monetary stabilisation does not replace restructuring. Until bank losses are recognized, until balance sheets are cleared, until depositors know what they can recover and under what conditions, the system will remain fragile. Banks can operate administratively. They can process payments, open fee accounts and accompany certain customers. But they do not regain their central economic role until confidence is rebuilt by law, transparency and recapitalization.
The increase in overnight deposits in books should therefore be read as short-term liquidity, not as a vote of confidence. In an economy marked by past inflation, wage adjustments, cash payments and frequent conversions, current accounts may temporarily inflate. Companies deposit funds there before paying suppliers or employees. Households receive money before withdrawing or converting them. This movement does not create savings available to finance investment in the medium term.
On the contrary, the decline in savings deposits in books underlines the caution of households. Keeping money in books in a savings account implies confidence in the currency, the bank and the stability of the rules. This confidence remains weak. Applicants have learned that conditions may change. They know that the real value of the currency can be affected by a political, military or monetary crisis. They therefore favour flexibility. The economy operates more with short cash balances than with long savings.
Banks, without normal credit function
The biggest consequence is credit. A private economy of strong banks finances its businesses, households and investments less well. Projects are delayed. Purchases of housing are becoming more difficult. Companies are self-financing or giving up. Exporters lack lines of credit. Importers pay more often in cash. Young entrepreneurs depend on private funds, diaspora or foreign markets. The contraction of deposits is therefore not only an accounting phenomenon. It reduces the country’s capacity to rebuild.
This fragility is even more serious in times of war. Physical damage requires funding. Affected companies must repair, replace inventory, pay wages and restart. Displaced households must rent, rebuild, care for or attend school. A normal banking system could channel part of the aid, lend under guarantee, finance work and support productive sectors. The Lebanese system, on the other hand, remains too damaged to fully assume this function. Reconstruction may therefore depend more on donations, cash, external aid and individual arrangements.
The banking crisis also maintains a two-speed economy. Those with income in fresh currency can function. Those who depend on old deposits, wages in pounds or non-existent credits remain constrained. Export or diaspora-oriented companies can bypass the local system. Small domestic activities are more underfunded. This segmentation weakens economic cohesion. It makes recovery uneven, unstable and dependent on private networks rather than public or banking institutions.
Trust will not return by inertia
The return of deposits is not decreed. It requires conditions. The first is the clarification of losses. Applicants should know what is recognized, what is lost, what is guaranteed and what will be refunded. The second is the recapitalisation or resolution of banks. Sustainable settlements must be distinguished from those that are no longer sustainable. The third is the reform of banking and monetary governance. The same practices that led to the disaster cannot serve as a basis for rebuilding trust.
The fourth condition concerns justice. Depositors need to understand why some funds were released, why some losses were transferred, why some officials were not accountable, and why the rules were applied unevenly. Without minimal accountability, confidence will remain superficial. Economic agents can use banks out of necessity. They will not give them long-term savings. The difference between forced use and voluntary trust is at the heart of the problem.
The Lebanese authorities must also avoid confusing calm and healing. A less tense money market does not mean a sound bank. A stable book does not mean a restored savings. An increase in sight accounts does not mean long-term confidence. The figures for the week ended 21 May show precisely this ambiguity. The surface seems less unstable than during the years of panic. But the bottom line remains the exit of currencies and weak bank savings.
A political and financial indicator
Bank deposits are now a political indicator. They measure confidence in the state’s ability to deliver on its commitments. They also measure confidence in banks, the Bank of Lebanon, future laws and the possibility of an agreement with the IMF. Moody This assessment weighs indirectly on deposits. A defaulting state, without restructuring, cannot easily restore a credible banking system.
War adds additional pressure. The conflict has displaced more than one million people and weakened productive sectors. Tourism is falling back. Beirut airport sees its passengers drop sharply. Humanitarian needs are increasing. In such an environment, households favour immediate liquidity. They keep what they can in an available form. Companies reduce long-term commitments. Banks, on the other hand, cannot convince by simply offering an account. They must be part of a credible national reform.
The contraction of foreign currency deposits is therefore a warning. She said that the liquidity holders were not convinced by the current stabilization. She says that capital remains prudent. She says the confidence lost since 2019 has not returned. She also said that monetary figures should be read in depth. Lebanon can display a stable exchange rate and a fall in the overnight rate while seeing the base of its banking system erode.
The follow-up will depend on the decisions that remain outstanding. Clear bank restructuring could curb erosion. A credible agreement with the IMF could improve expectations. Security stabilization could support tourism, transfers and external flows. But without these elements, banks will continue to be used as limited payment instruments, not as institutions of trust. The May figures do not close the debate. They only recall that the banking crisis continues to be measured, week after week, in the silent movements of deposits.
