"Akhbar al-Yawm" agency

Fate of Deposits...An Unanswered Question Since 2019

A banking source: The hierarchy of responsibility starts from the top

The question of bank deposits has remained unanswered since the financial crisis erupted in 2019. With the formation of a new government and its commitment to addressing Lebanon’s lingering crises, fresh concerns arise over how this issue will be tackled within the current political landscape.

In his inaugural speech, President Joseph Aoun vowed, “I vow not to compromise on depositors' funds”. Similarly, the government’s policy statement, under the banner of "Reform and Rescue", emphasized that depositors' rights will be a top priority. The statement also pledged to develop a comprehensive plan based on international best practices to safeguard deposits.

But what can depositors actually expect?

A banking source, speaking to "Akhbar Al-Yawm" agency, stressed that the government must begin by distributing responsibilities according to international standards and legal frameworks. The source argued that the necessary principles are already in place, but disagreements persist over their interpretation.

According to the source, accountability must be assigned in a structured manner:

- The state bears the primary responsibility, having spent the funds.
- The central bank (BDL) comes next, as it facilitated financing for the government.
- Commercial banks follow, since they placed depositors’ funds with the central bank.
- Depositors come last in this chain of responsibility.

The source explained that once an appropriate solution is found within this hierarchy, the next step would be restructuring the banking sector. This would involve addressing the financial gap through a transparent audit to determine who was responsible for the crisis.

In this regard, the source revealed that Prime Minister Nawaf Salam has reassured banks that they will be included in discussions and the formulation of financial recovery plans. This marks a shift from the previous administration under Najib Mikati, which had excluded banks from the reform process to avoid conflicts of interest between financial institutions and the state. According to the source, "the authorities that mismanaged public funds should not be the sole architects of the solution".

When asked about past attempts to resolve the crisis, the source admitted that all previous approaches have failed. After five years of stagnation, Lebanon remains trapped in a vicious cycle, with no clear resolution in sight.

Lebanon’s financial crisis erupted in late 2019 as warning signs of economic collapse intensified due to skyrocketing public debt. The situation worsened as the Lebanese lira rapidly lost value against the US dollar. Meanwhile, the economy had become overly reliant on the banking sector, which itself depended on foreign capital inflows, particularly remittances from Lebanese expatriates, to sustain government deficits and public spending.