After the banks became under the pressure of the dollar scarcity crisis and their loss of foreign liquidity in exchange for their having to implement the circulars of the Banque du Liban, most notably Circular 154 to increase their capital and create liquidity abroad, and Circular 158, which requires them to pay $400 in cash per month to their clients, the latter has become a major player in the black market in search of what was found. of dollars in that market and collected.
Some banks have become money changers, buying and selling dollars and dollars from their customers and from the black market, whether to secure the foreign cash they need or to settle the bad debts of some of their customers, or by tempting them with a handful of fresh dollars in exchange for closing their bank accounts in dollars, thus reducing the size of their deposits dollar and reduce the value of its future losses. It is a step aimed at improving banks’ balance sheets in preparation for the next stage, which will include the merger of banks that enjoy a somewhat sound position, and the liquidation of a well-known number of banks that have gone too far in failures, leading to bankruptcy.
The banks’ need for cash liquidity in foreign currencies has prompted them to recruit their managers at all levels to convince customers to either close their accounts in dollars or pounds in return for obtaining small percentages of cash in dollars, or also urge customers to purchase bank checks from other customers’ accounts in exchange for securing cash dollars. These practices made it difficult for the Banque du Liban to control the black market in the presence of other players who activate speculation in that market and put pressure on the dollar exchange rate.
In this context, the Banque du Liban issued a basic circular bearing No. 159, addressed to banks and supervisory commissioners, and related to exceptional restrictions on some operations carried out by banks, as the circular prohibited banks operating in Lebanon from buying foreign currencies in the parallel market, but allowed them to buy foreign currencies. Foreign currencies transferred directly from abroad to their customers at the market price, exclusively for investment, medium and long-term purposes or to improve commitments abroad, provided that these operations are recorded on the electronic platform for exchange operations.
The Banque du Liban also prohibited banks from selling and buying checks and bank accounts in foreign currencies for their own account, directly or indirectly, and asked them to declare to the Banking Control Committee, within a maximum deadline of 15 September, for the total of each of the aforementioned operations that they carried out from the year 2019 until The date of issuance of this circular. The Central Bank returned and issued a clarification statement confirming that the purchase by banks of foreign currencies transferred directly from abroad to their customers at the market price, is done exclusively if these customers wish to do so. He explained that the aforementioned circular does not affect the freedom to use the new money by its owner to benefit from cash withdrawals in the currency of this money and all banking services provided by the bank, including transfers abroad and bank card services in Lebanon and abroad.
Is the aim of this circular to have the Banque du Liban monopolize the black market?
In this context, the former Deputy Governor of the Banque du Liban, Ghassan Al-Ayyash, said that if the intentions were good, the goal of Circular 159 would be to enable the Banque du Liban to control the purchase of dollars by Lebanese banks on the black market, thus fueling the currency market. Electronic exchange operations.
He told Al-Gomhoria that the circular specified the narrow cases in which banks are allowed to buy foreign currencies.
What is striking is that the circular was issued bearing some vague phrases such as “the market price.” The concerned circles feared that the goal of the circular would be the Banque du Liban’s acquisition of the sums of currencies received from abroad and paying them to customers in Lebanese pounds. The source of these concerns is the previous arrangements of the Banque du Liban in this direction, which included the amounts transferred through money transfer companies.
Ayyash considered that the conditions the country is going through require encouraging non-residents to increase their transfers to residents, and not the other way around. If it turns out that the Banque du Liban monopolizes what they transfer to their families and arbitrarily determines the exchange rate on the basis of which funds are transferred, this leads to a reduction in transfers through banks, and this is completely opposite to the interest of the Lebanese economy in the current circumstances.
He considered that the reassurances issued by the Banque du Liban are useful, as it affirmed the right of the recipients of the funds to receive them in the transfer currency, noting that it is not the custom of the central banks to issue vague instructions attached to them with clarifications.