The International Monetary Fund on Wednesday welcomed amendments to Lebanon’s bank resolution law as a ‘major step’ toward addressing the country’s deepening financial crisis, though implementation risks remain.
Lebanon’s parliament last week approved changes to the draft law, which aims to restructure the banking sector, address funding shortfalls, and allow depositors to gradually recover frozen funds. The IMF’s representative in Lebanon, Federico Lima, emphasized that ‘effective implementation of this new bank resolution framework is critical.’ He added that discussions with Lebanese authorities continue to align the proposed Financial Stabilization and Depositor Recovery (FSDR) law with international standards.
Legislator Alain Aoun said the amendments met 99% of the IMF’s requirements, stating, ‘We met 99% of what they wanted.’ The reforms include changes to the Central Bank’s governance, altering the composition of the Higher Banking Commission and granting it authority to determine the fate of troubled banks—whether through restructuring, liquidation, or rehabilitation.
The law now requires approval from Lebanon’s president before taking effect and faces potential review by the Constitutional Council. A senior Lebanese official criticized the prolonged inaction, noting, ‘This is the only country in the world that has had a banking crisis for seven years and has not tried to find a solution.’
The crisis, which began in late 2019 amid unsustainable fiscal policies, has left the Lebanese pound down more than 90% from pre-crisis levels. The government estimated losses from the financial meltdown at $70 billion in 2022, a figure analysts suggest is likely higher. Damages from the recent war with Israel, estimated at $7 billion, have further strained public finances.
The IMF also urged Lebanon to pursue tax reforms to stimulate reconstruction spending, warning that prolonged stagnation is unsustainable.
