Lebanon's banks close indefinitely after court ruling criticised

Decision by Association of Banks of Lebanon will not affect ATMs

Lebanese banks have begun an open-ended strike, although ATMs will remain open, a development that comes after a meeting of the Association of Banks in Lebanon (ABL).

Recent judicial developments were discussed at the general meeting.

A court last week ruled in favour of a couple who had been involved in a dispute with Lebanon's Fransabank over their blocked deposits.

The Court of Cassation had ordered that the couple be paid in cash, rather than a cheque — which would have been at a much lower value.

Since an economic crisis that first became apparent in 2019, informal capital controls have been imposed on depositors, some of whose life savings have evaporated.

For those holding US dollar accounts, not only are their withdrawals capped but they can take out cash in the Lebanese pound only and at a rate far below the parallel market, which is a more accurate reflection of its value.

The financial meltdown has been blamed on decades of mismanagement by Lebanon’s ruling classes, including its banking system and the central bank.

The ABL met on Monday to discuss “recent decisions” and judicial measures and “their impacts on banking workflow and the rights of depositors”.

It criticised the ruling of the Court of Cassation, arguing it was impossible for banks to pay out to all depositors in full.

“Any individual solution, even if it seems to some that it constitutes a victory … is at the expense of all depositors,” the ABL said.

“For the 1,000th time, the crisis is not a crisis of one bank or even of all banks, but rather a crisis that affects the entire financial and banking system,” including Lebanon’s central bank, it added.

The ABL also urged Lebanon to pass a capital control law, formalising the cash withdrawal restrictions.

The latter is a key demand by the International Monetary Fund for Lebanon to access a $3 billion bailout. The IMF has criticised the slow pace Lebanon has taken to implement those steps, as part of a staff-level deal signed in April.

Since 2019 the local currency has plunged in value by more than 95 per cent. Salaries have failed to meet soaring inflation, with much of the population now in poverty, unable to obtain basic goods and necessities.