Last week, Lebanese Deputy Prime Minister, Saada Al-Shami announced the bankruptcy of the state, and the Central Bank of Lebanon.
“The losses will be distributed to the state, the Banque du Liban, banks, and depositors, and there is no specific percentage. Unfortunately, the state is bankrupt, as is the Banque du Liban, and we want to come out with a result. The loss occurred due to policies that have been in place for decades, and if we did nothing, the losses would be much greater,” Al-Shami said.
The fate of Libyan investments in Beirut, especially in the banking sector, real estate, and tourism, remains unknown. Libya is set to have the largest share of these losses.
According to a report by the Libyan Audit Bureau 2020, the total deposits of North Africa Bank until the end of last year, amounted to more than $515 million dollars.
“The existing deposits until 12/31/2021 amounted to $515,830.003, it is not possible to recover the value of the deposit during the year 2020. The current situation is that it has defaulted, and there is no indication that it will be liquidated in the near future,” the report stated.
The report refuted the deposit: “Bank of Beirut SAL deposit, the credit rating of the country is RD (defaulted) and the bank is NR (unrated).”
It noted that the Libyan Foreign Bank (LFB) opened a deposit with a value of €65 million, with the Bank of Beirut on 27 June 2019, for a period of three months, at an interest rate of 2%. It subsequently renewed it until 9 March 2020. At the time of filing, there were clear indications of the deteriorating economic situation in Lebanon.
“The matter was reflected in the Bank of Beirut’s inability to pay, and its demand for an extension. Despite the LFB’s request on 6 April 2020 to liquidate, the Bank of Beirut renewed it again due to a delay in requesting the liquidation procedure at the time required by the SWIFT procedures,” the report added.
In light of renewing the deposit again at an interest rate of 2.5% to 11 June 2020, and extending it for a week, at an interest rate of 1%, the deposit began to be renewed periodically in return for the collection of interest at varying rates.
“In light of the current indications that the Lebanese authorities are placing other restrictions on their deposits, by requiring 18 months as a minimum term of the deposit, this increases the risks related to the Beirut deposit. It requires the formation of the necessary provision for it, and the bank officials bearing their responsibilities towards investing in a high-risk environment,” the report read.
Observers demanded that the LFB discloses the fate of other deposits, including the deposit of the Bank of Beirut.