The information below provides details about the Lebanon banking system, and details on opening a Lebanon offshore bank account. You will find details on the laws and regulations that govern the banking system, as well as a list of local and international banks that operate in Lebanon.
Starting with the independence of Lebanon in 1943 and continuing with the establishment of the Banque du Liban in 1964, the banking system in Lebanon prospered. The pronounced difference between foreign and domestic Lebanese banks had been relatively reduced as the former no longer greatly monopolized the foreign financing of Lebanon, contributed to its domestic financing, and began competing for local deposits. In fact, the Lebanese banking system witnessed the entry of 13 foreign banks — Arab Bank Ltd.
(Jordan), British Bank of the Middle East (Great Britain), Rafidain Bank (Iraq), Saudi National Commercial Bank (Saudi Arabia), Algemene Bank Nederland (Netherlands), Chase Manhattan (USA), The First National City Bank (USA), The Eastern Bank Ltd (Great Britain), Jordan National Bank (Jordan), Societe Tunisienne de Banque (Tunisia), Moscow Narodny Bank Ltd. (Great Britain), The Bank of America (USA), Habib Bank Overseas Ltd. (Pakistan)– and more than 40 Lebanese banks of which the Eastern Commercial Bank (currently known as the Banque de la Mediterrannee), Banque Libanaise pour le Commerce, Banque Sabbagh, Banque G. Trade (currently known as Credit Lyonnais), Banque du Liban et D’Outre Mer, Intra Bank, Federal Bank of Lebanon, Banque Belgo-Libanaise (currently known as Societe General Libano-Europeene de Banques), Banque Saradar, Bank of Beirut and the Arab Countries, Banque Joseph Lati et fils, Beirut Ryad Bank, Banque Pharaon et Chiha, Mebco Bank, Byblos Bank, Credit Libanais, Banque Beyrouth pour Le Commerce, Banque Audi, Bank of Kuwait and the Arab World, Banque Geagea, Banque du Credit populaire, Adcom Bank, Rif Bank, and Beirut Universal Bank.
In the period prior to the establishment of the Banque du Liban, banks operating in Lebanon were classified by the Ministry of Finance into three categories. The above mentioned approved banks whose guarantees were accepted by the Lebanese government, non-approved banks whose guarantees were not accepted, and discount houses. Since 1964, and by virtue of the Code of Money and Credit, a list of banks operating in Lebanon has been issued by BDL in January of every year.
Prior to that year, the Lebanese banking system was characterized by the absence of specific banking regulations and supervision. Banks merely abided by the Code of Commerce which regulated commercial business, with the exception of the Bank Secrecy Law enacted in 1956. Regulations, supervision, and control were only introduced with the enactment of the Code of Money and Credit and the establishment of BDL, which was granted regulatory and supervisory authority over the banking system as part of its function to safeguard its soundness.
Currently, regulations governing the establishment and activities of Lebanese commercial banks, branches of foreign banks, specialized banks, Lebanese financial institutions and foreign financial institutions, representative offices of foreign banks, and brokerage firms are available. All are supervised by the Banking Control Commission which is an independent supervisory body established at the BDL in 1967.
The banking system is sound and enjoys a high capital adequacy ratio of about 19 percent, more than double the recommended ratio set by Basel I (eight percent). The Central Bank- Banque du Liban and the Association of Banks have set up a committee to prepare the banking sector for compliance with Basel II recommendations concerning capital adequacy.
Encouraged by the Central Bank, the Lebanese banking sector continues to consolidate. Over twenty-five bank mergers have taken place in the past decade, and additional mergers are anticipated after Parliament approves a revised Bank Merger Law. International firms established in Lebanon such as BNP/Paribas, Credit Suisse, HSBC, Citibank and Merrill Lynch remain active. Many sectors are dominated by traditional businesses in the hands of commercially powerful families. The Government is trying to improve the
transparency of such firms in order to help solidify an emerging capital market for company shares.
As of September 2004, the total assets of Lebanon’s five largest commercial banks were estimated at USD 35.2 billion, or 60.5 percent of total bank assets in Lebanon. About 25.8 percent of total loans are estimated as non- performing according to September 2004 statistics.
However, banks continue to maintain more than two-thirds provisions against non-performing loans, while the remaining provision is covered by adequate collateral.
The Financial Action Task Force (FATF) decided to end formal monitoring of Lebanon in October 2003 in recognition of Lebanon’s sustained efforts to implement its anti-money laundering regime. In July 2003, Lebanon joined the Egmont Group of Financial Intelligence Units, which promotes international cooperation in the fight against money laundering. On November 30, 2004, a Lebanese Central Bank official was elected to a one-year term as President of the newly established Middle East and North Africa (MENA) Financial Action Task Force (FATF), which seeks to promote best practices in combating money laundering and terrorist financing in the region.
The Lebanese banking system is endowed with several characteristics that promote the role of Beirut as a regional financial center, in terms of ensuring protection for foreign capital and earnings.
The Lebanese currency is fully convertible and can be exchanged freely with any other currency. Moreover, no restrictions are put on the free flow of capital and earnings into and out of the Lebanese economy.
Both article 16 of law No. 282 dated December 30, 1993 and article 12 of decree No. 5451 dated August 26. 1994, offer exemptions from income tax on all interest and revenues earned on all types of accounts opened in Lebanese banks.
On the first of April 1975, decree No. 29 established a free banking zone by granting the Lebanese government the right to exempt non residents’ deposits and liabilities in foreign currency from:
The law of December 1961 allows for the opening of joint accounts. These accounts are opened in the name of several persons and can be used by any one of these persons. In case of death of any one of the account owners, his/her partner can use the account without being subject to heirs procedures. In case one of the account holders is declared bankrupt, the account becomes the ownership of the bankrupt party, unless it is proven otherwise.
The bank can’t do any clearing for the different accounts of any account holder without the written approval of all other partners. The lifting of bank secrecy on the account is non operational without it being declared by all partners. In case any litigation occurs among the different holders of the account, the bank shall freeze the account from the day it receives notification of the litigation and until it is settled by the courts.
The banking secrecy, institution inherent to the Lebanese banking system, is governed by the provisions of the law dated September 3, 1956.This law submits to the “absolute” specific banking secrecy, all the banks duly authorized to undertake a banking activity in Lebanon as Lebanese joint-stock companies or as branches of foreign banks.
The banking secrecy is absolute in favour of the clients of the above-mentioned banks which cannot disclose to any private person or any administrative, military or judicial authority, the names of their clients, their assets and any fact brought to their knowledge relating to their clients’ operations (opening of a current account, safebox lease etc.).
This ban applies, not only to the banks’ directors and employees, but also to any person who, by reason of its quality or function, has knowledge of the books, operations and banking correspondence such as Notaries Public, lawyers or auditors. Accordingly, the banking secrecy can be opposed to the Lebanese tax authority and no distraint can be carried out on the assets deposited in the banking establishments without the written authorization of their owners.
The intentional breach of the banking secrecy – and even the beginning of such a breach- exposes its author to pursuits and penal sanctions, being noted that the criminal prosecution cannot be initiated unless the client institutes proceedings. However, there are some exceptions to the principle of the banking secrecy, which are restrictively provided for by the Lebanese law:
Joint accounts however, operating with the signature of one of their holder, remain covered by the banking secrecy vis-à-vis the heirs of the deceased whose rights in the joint account are not devolved to his heirs but to the co-holder of the account who is entitled to use freely all the account. Therefore, the bank is not authorized to provide the heirs of the deceased holder with any information unless expressly provided for to the contrary in the contract for the opening of the account.
The Banque du Liban
The Banque du Liban was established by the Code of Money and Credit promulgated on 1st August 1963, by Decree no. 13513. It started to operate effectively on 1st April, 1964.
BDL is a legal public entity enjoying financial and administrative autonomy. It is not subject to the administrative and management rules and controls applicable to the public sector. Its capital is totally appropriated by the State. The BDL is vested by law with the exclusive right to issue the national currency. As stipulated by article 70 of the Code of Money and Credit, the BDL is entrusted with the general mission of safeguarding the national currency in order to ensure the basis for sustained social and economic growth. This mission consists specifically in :
Development and regulation of the clearing and settlement operations relative to different financial and payment instruments and marketable bonds.
List of banks operating in Lebanon:
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