Head of the Money and Budget Committee, Representative Ibrahim Kanaan, stressed, at the beginning of the discussion of the banking reform law in the House of Representatives, that the priority must remain to protect the rights of depositors before moving on to researching how to distribute burdens and losses, stressing the necessity of determining the actual financial capabilities of the state and banks before approving any mechanism for recovering deposits.
Kanaan said: “Our concern is to preserve people’s rights before engaging in the distribution of burdens,” considering that “it is not possible to implement the deposit recovery law without guaranteeing people’s rights and knowing the capabilities and ability to implement it.”
He pointed out that there are gaps in the draft financial gap law as referred by the government, pointing out that these gaps prevent its implementation in its current form, and that a ministerial committee is working to reconsider it.
Kanaan renewed his call on the government to conduct a comprehensive audit of the banks’ assets inside and outside Lebanon, as well as the state’s assets, with the aim of forming a clear picture of the actual capabilities available before determining how to deal with the losses and return the rights to their owners.
Regarding the International Monetary Fund, Kanaan stopped short of repeating his calls for amendments to the laws, considering that this “calls us to put a question mark over the Fund’s delay in signing an agreement with Lebanon for reasons not related to reform.”
Kanaan’s positions come as the House of Representatives moves to discuss the Banking Reform Law, which is one of the basic pieces of legislation in the process of restructuring the banking sector and addressing the accumulated repercussions of the financial crisis that erupted in 2019 and led to the imposition of broad restrictions on depositors’ access to their funds.
Bank reform is directly linked to a broader legislative and financial package that includes determining the size of losses and distributing them among the concerned parties, assessing the banks’ conditions and their ability to continue, in addition to determining the mechanisms that will be adopted to treat deposits and recapitalize viable banking institutions.
Auditing bank assets gains importance in this path, as identifying assets inside and outside Lebanon, in addition to the state’s assets and obligations, constitutes an essential element in calculating the available resources and the extent of the ability of any financial plan to be implemented, away from setting obligations that are not based on actual assets and capabilities.
As for the draft financial gap law, it is supposed to address a fundamental aspect of the crisis related to identifying the accumulated losses in the financial system and the mechanism for dealing with them. However, the continued debate on a number of its articles prompted them to be re-examined by the government before completing the legislative process.
This comes in light of the continuation of negotiations between Lebanon and the International Monetary Fund regarding a reform program, after reaching a final agreement during the past years was linked to a set of procedures and legislation related to the banking sector, public finance, governance, and restructuring of the financial system.
