Local

Salameh: The severe crisis is behind us

This image grab taken from a video published by Lebanon's Central Bank on April 29, 2020 shows Central Bank chief Riad Salameh giving a televised speech in Beirut. AFP/Lebanon's central bank

BEIRUT: Central Bank Gov. Riad Salameh assured that BDL and the Banking Control Commission will take all the necessary steps to activate the banking sector’s contribution to finance Lebanon’s economy and that the economic crisis will soon be over.

These remarks came during the monthly meeting between Salameh and the delegation from the Association of Banks in Lebanon Thursday.

A statement by ABL said the governor believed that “the severe crisis is behind us, and that BDL and the Banking Control Commission will take all the procedures legally available to reactivate the sector’s contribution to financing the economy.”

“Capitalization and liquidity are essential for financing the economy and the sustainability of the sector is linked to its ability to renew itself,” Salameh said.

The governor reiterated that BDL can no longer exhaust the remaining foreign currency reserves to subsidize fuel oil, wheat and pharmaceutical in a few months.

“I informed the government not to use BDL’s compulsory reserve in foreign currencies for the purpose of subsidies. We can continue supporting fuel, wheat and medicine for another two or three months at an exchange rate of LL1,500 against the dollar.”

He added that subsidizing food stuff at a rate of LL3,900 will also end in two or three months.

The statement added that the governor stressed that the economy is suffering from major problems with the complete absence of any solutions.

“The economic plan is not put into practice and there is no clarity on how to deal with the consequences of stopping payment (Default), which left a great shock to the economy and the financial sector. The negotiations with the International Monetary Fund are still pending. If this situation continues, there will be no return to growth and economic revitalization,” he added.

He also said that the public Treasury is suffering as well as the economy due to the high budget deficit.

Salameh hoped that the government would finalize the cards proposal to protect the purchasing power of the most vulnerable communities.

The governor stressed the need for banks to adhere to Circular 154, which aims on one hand to recapitalize external liquidity.

“The banks have the ability to recapitalize 3 percent (of their external funds) in an appropriate manner. In addition, commitment to retransfer 15 percent for customers and 30 percent for Politically Exposed Persons as this would contribute to strengthening liquidity. Circular 154, on the other hand, aims to recapitalize the sector, perhaps exceeding 20 percent. Banks can sell depositors Perpetual Bonds or shares, provided that they are carried out after an evaluation process by reliable bodies.”

The statement said the association assured that based on a law passed by Parliament, BDL will support student dollars as well as wheat and medicine.

It also saw the need to create a centralized mechanism so that the law would not be misused by resorting to more than one bank by those involved.

ABL supported the governor’s proposal to initiate a dialogue with representatives of depositors and with the participation of the Banking Control Commission.

In response to a question about the decline in the external assets of the Banque du Liban between Sept. 15 and 30, by $2.2 billion, the governor explained that this is mainly due to the repayment of BDL loans in dollars by banks.

 

Recommended





Advertisement

Comments

Your feedback is important to us!

We invite all our readers to share with us their views and comments about this article.

Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.

Alert: If you are facing problems with posting comments, please note that you must verify your email with Disqus prior to posting a comment. follow this link to make sure your account meets the requirements. (http://bit.ly/vDisqus)

comments powered by Disqus

Advertisement

FOLLOW THIS ARTICLE

Interested in knowing more about this story?

Click here