Source: The Middle East
There is intense tension, albeit not yet apparent in its full truth, in the Lebanese financial and banking circles, as a result of the unprecedented mixing of the imminent judicial claims, locally and in Europe, pertaining to the financial sector, its leaders and institutions, coinciding with the high level of professional concerns about the consequences of the successive pumping of accusations related to By laundering money and affecting leaders and institutions in this sector.
In isolation from the divergence of expectations related to the international judicial track, which is expected to reveal the main part of its features and stations in the middle of next week, with an indication of the actions and conclusions related to the entitlement of the appearance of the Governor of the Banque du Liban, Riad Salameh, before the French judge Aud Bourisi in Paris, a senior banking official acknowledges that the involvement of the financial sector In the neck of the bottle and the intensity of the pressures that must be faced on multiple fronts, they portend new dramatic developments whose serious damage to the already exhausted reality, role and future of the banking system may not be avoided.
Adding to the blurring of the financial scene is the exacerbation of the political and legal circumstances surrounding the end of Riad Salameh’s term in July, which raises added concerns that are not limited to the site alone, but extend to the cash management system that is currently based on a series of regulatory and exceptional circulars issued by the governorship. In particular, those related to liquidity control mechanisms and hard currency reserves with the Central Bank, restructuring the banks’ capital and activities, direct intervention in the foreign exchange market, adopting an exchange rate for the pound in cash dollars through a banking platform, and securing public sector salary flows in cash dollars.
These growing complications impose, according to the banking official, a declaration of what resembles a financial emergency by the government, which allows it, based on the necessities that govern its tasks in conducting business, to decide early on the possibility of a vacancy in the position of the “central” ruler, and within the context of legal solutions that are limited to two options after Prime Minister Najib Mikati excluded the possibility of Salame’s renewal, although this possibility remains within the framework of the legitimacy of “the continuation of the public service”, and linked to a voluntary resignation after the election of a new president of the republic.
The first option requires that the government, supported by sufficient internal consensus, initiate the early appointment of a new ruler, to ensure a smooth transition to the monetary decision, but this is an unlikely step in light of the presidential vacuum and its circumstances. As for the second option, which can be awarded quickly, it is also conditional on Parliament Speaker Nabih Berri accepting the transfer of duties and responsibilities to First Deputy Governor Wasim Mansouri. Thus, adherence to what was stipulated in the Monetary and Credit Law, in Article 25, which explicitly states that “in the event that the position of the ruler becomes vacant, the first deputy ruler shall assume the duties of the ruler until a new ruler is appointed.” major in the first category.
With regard to the technical requirements that necessitate the rapid completion of a vacancy in this vital location, the Banque du Liban bears the largest part of the ongoing burdens of the monetary and financial crises on its budget.
According to a banking report, the bank’s balance sheet clearly shows the negative accumulation in net asset value items. While the central bank’s capital account amounts to $700 million, adjustments have been made to the valuation differences in the assets section at a value of $35 billion, and other assets at a value of $11 billion, which led to recording a negative net asset value of $45 billion, without calculating losses. The potential for public sector loans and the international debt securities portfolio (Eurobonds), which would cause total losses for the Banque du Liban of about $63 billion.
In parallel, a banking official expresses, in an interview with Asharq Al-Awsat, his fears about the exceptional simultaneity of public and professional pressures that ensure that the financial sector and markets are pushed forward into a state of “uncertainty”, which constitutes ideal climates for the escape of monetary speculation on the one hand, and indicates an additional and painful narrowing that affects Financial channels between Lebanon and abroad, so that the correspondent banks of the banking system are forced to adopt it under the pretext of warding off risks and responding to the requirement of automatic hedging, pending the results of the local and foreign prosecutions. Indeed, the Association of Banks warned of the danger that some public prosecutions continued to charge against some banks after changing the correct criminal description from an alleged crime of “concealing information about the judiciary”, naming it and generalizing it out of bad faith as an allegation of a “money laundering” crime, which is an improper description that does not fit with reality.
The Association of Banks considers that focusing on the mischaracterization of the claim as “money laundering” leads to an increase in damage to the Lebanese banking sector since the beginning of the crisis and the Lebanese state’s failure to pay its debts without any coordination with creditors. This leads to foreign correspondent banks to stop dealing with Lebanese banks until an acquittal ruling is issued by the Courts of First Instance after several years in which the false suspicion of money laundering has been completed by killing the banking sector. Noting that the state used the largest part of the deposits of depositors employed in the Central Bank in violation of the law.