In the first nine months of 2003, four main developments were observed: the unexpected rate of growth in bank’s deposits or in monetary aggregate M3, the sector’s participation in easing the state’s debt burden; the reduction of interest rates; the creation of a mechanism to review and settle non-performing loans. (I) Growth of M3 We were surprised by the extent of the commercial banks’ balance sheet growth, mainly in the deposit base growth. This is reflected by the growth of the monetary aggregate (M3: amount of money in circulation plus deposits at banks), which increased by 14% from September 2002 to September 2003. Usually, M3 grows by real and nominal growth, credit to the private economy plus credit to the public economy and by the changes in net foreign assets (balance of payments) if the balance is positive. M3 decreases if there is flight of money from Lebanon to abroad.
