The Association of Banks in Lebanon: the financial recovery plan is “disastrous” and depositors will bear the losses

The Association of Lebanese Banks said on Saturday that it completely rejected the latest draft of the government’s financial recovery plan, which aims to pull the country out of an economic collapse that began in 2019.

The association described the plan as disastrous because it places a large percentage of the losses from government policies on banks and depositors.

Lebanon is going through a third year of financial collapse caused by decades of corruption and bad policies that have resulted in the currency losing more than 90% of its value and banks have prevented most savers from accessing accounts. in hard currency. A government bailout project in early questyear estimated a gap of about $ 70 billion in the financial sector.

The government estimates the losses of the financial sector in about 72 billion dollars.

The association said it had “instructed its legal advisors to study and present a series of judicial procedures to protect and collect the rights of banks and depositors.”

Lebanese banks have been a major lender to the government for decades, helping to finance a profligate and corrupt state that suffered a financial meltdown in 2019.

The crash prevented depositors from accessing their savings, and the local currency lost more than 90% of its value. The Association of Lebanese Banks rejected an earlier draft of the plan in February, saying it would lead to a loss of confidence in the financial sector.

Assembly approval is not required for the government to launch a plan, but experts say its support from the banking sector can help resolve the crisis.

The current draft includes a number of financial reforms, including banking sector reform and setting limits on the amount depositors can recover from their accounts.

Earlier this month, Lebanon reached an expert-level agreement with the International Monetary Fund to benefit from the Extended Fund Facility for a period of 46 months, under which Lebanon requested access to the equivalent of about 3 billion dollars.

But access to these funds is conditional on the implementation of a large number of economic reforms and the restructuring of the financial sector.

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