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Salameh mulls easing capital requirements

  • File - An employee counts money at the Central Bank in Beirut, Monday, Sept. 30, 2013. (The Daily Star/Hasan Shaaban)

BEIRUT: Central Bank Governor Riad Salameh is contemplating easing Lebanese banks’ capital requirements to help shareholders and investors collect more dividends from profitable commercial lenders, bankers said Monday.

Salameh made the announcement to a delegation from the Association of Banks in Lebanon last week but gave no further details.

“The capital compliance limit set by the Central Bank is much higher than many leading banks in Europe. We have exceeded Basel III requirements, which set the capital adequacy ratio at 8 percent,” Joe Sarrouh, the adviser to the chairman of Fransabank, told The Daily Star.

Almost all of the banks in Lebanon are endeavoring to achieve a 12 percent capital adequacy ratio, and most of them have achieved this goal without difficulty.

Although Salameh did not spell out the measures he may take concerning Basel III requirements, some believe that the governor may ease the capital requirements so that the investors can collect bigger stake from the dividends.

“If you ease a little bit the capitalization requirements, then you will have the possibility to distribute more dividends,” Sarrouh explained.

Another banker suggested that it wouldn’t hurt for example to lower the capital adequacy ratio from 12 percent to 10 percent, stressing that even this was above that achieved by many European banks.

Sarrouh said banks in general were performing well in terms of profits and growth and this trend was expected to continue in 2014.

Lebanese commercial banks have reported healthy profits and deposits growth in 2013 despite the numerous economic and political problems plaguing the country.

Salameh estimated during his meeting with the Association of Banks that the sector’s total profits for 2013 could reach or slightly exceed their 2012 level, despite the allocation of new provisions. He said that the banking sector’s aggregate deposits rose by 7 percent in 2013 and that the dollarization rate of deposits remained at 66 percent last year.

Makram Sader, the secretary-general of ABL, said the easing of Basel III requirements might not necessarily touch the capitalization of the commercial banks.

“I don’t know what direction the Central Bank may take concerning this issue, but I know that Salameh has been mulling such measures before,” Sader said.

“The European banks have contemplating extending the 2015 deadline to enforce the new ceiling of Basel III because many of them may have difficulty realizing this target in the future. They may seek the extension to 2020.”

Sader believes that none of the banks are now willing to tamper with the ratio at this stage unless they received some signal from the Central Bank.

“When the Basel III requirements are eased, more investors would join the banks. The investors are keen to grab a bigger stake from the dividends irrespective of the capital requirements,” Sader said.

Salameh assured the Association of Banks that pressure from the Unites states on Lebanon’s banks had eased considerably.

“The international pressure on the Lebanese banking sector has eased following the lobbying efforts by the ABL on the new regulations issued by the Central Bank,” the governor said.

He also revealed that most of the 360 money dealers operating in Lebanon increased their capital as per the Central Bank’s regulation. He added that only 30 to 40 money dealers remained noncompliant with the new regulations.

Many exchange dealers complained in the past that banks refused to deal with them or accept their deposits under the pretext that some of their operations were suspicious.

 
A version of this article appeared in the print edition of The Daily Star on January 21, 2014, on page 5.
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Summary

Central Bank Governor Riad Salameh is contemplating easing Lebanese banks' capital requirements to help shareholders and investors collect more dividends from profitable commercial lenders, bankers said Monday.

Almost all of the banks in Lebanon are endeavoring to achieve a 12 percent capital adequacy ratio, and most of them have achieved this goal without difficulty.

Although Salameh did not spell out the measures he may take concerning Basel III requirements, some believe that the governor may ease the capital requirements so that the investors can collect bigger stake from the dividends.

Another banker suggested that it wouldn't hurt for example to lower the capital adequacy ratio from 12 percent to 10 percent, stressing that even this was above that achieved by many European banks.

Salameh assured the Association of Banks that pressure from the Unites states on Lebanon's banks had eased considerably.


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