E Marwan Iskandar recently said that it is not realistic to think that Lebanon has not been affected by the global financial crisis, especially considering the public debt; what’s your take on this?
It’s clear that we cannot say the international crisis has not affected Lebanon. We live in a global economy and Lebanon is very involved in the world; many Lebanese work abroad so they will either not be able to send any money or will send less money home. Up till now, a reduction of remittances has not materialized but we have not seen any figures, it’s just speculation. This is only part of the equation.
The first [Lebanese] people that were really affected by the crisis in the Lebanese diaspora were those working in the banking sectors abroad. Nevertheless, what we’ve experienced in the past few years is a very strong euro and very strong commodity prices and we should see much less inflation this year. Also, the Beirut Stock Exchange was affected by the crisis but it was delayed.
Moreover, depositors realized that the profile of risk for Lebanese banks was totally different than other banks abroad, because they didn’t have structured products or toxic assets. First of all you have the central bank’s regulations, but also there is the conservative approach of Lebanese bankers. We’re used to crises in the past, so we always have to be cautious and keep very high liquidity. If you look at the past four years, there have been major earthquakes — the first being the assassination of [former Prime Minister] Hariri. After that catastrophe we had only 3.5 percent of withdrawal from the banking system. After a couple of months the money came back and we had a strong increase over that year.
E Some believe that by lending the government money, Lebanese banks are perpetuating the country’s debt problem. How much longer can the banks carry Lebanon’s debt?
There are definitely structural reforms that have to be implemented. All the economic associations have asked for this for years. The Lebanese economy has huge potential and we need politicians to help raise this potential, and this will only happen through new reforms. We hope that with the new parliament, the right decisions will be taken towards reforms.
As banks, we are not encouraging the government to raise the public debt. We’re playing an active role to help the government and the state reform in order to help the economy grow. We believe there’s huge potential in the economy, we can easily double the GDP just by letting private initiative work. If you have the right set of laws and reduce bureaucracy, you will probably see a doubling of the GDP. If the GDP doubles, the level of debt that Lebanon has today will be reduced by half and it will be equal to the ratio you are seeing today in the Western world. Already you can see that the ratio of debt over GDP reduced tremendously last year, because of the strong increase in GDP and because of inflation. This is a manageable issue, but the most important thing really is to let people work, develop the economy of the country and continue to attract foreign direct investment in Lebanon.
E Do you expect to see mergers and acquisitions in the Lebanese banking sector?
Definitely there is very strong competition between banks and I think the Lebanese are getting the benefits of this competition through unbelievable rates for their deposits and their credits. Mergers and acquisitions is something that’s needed for the banks to be larger, stronger and play a major role in the region as well as on a global scale. It’s something we’d like to see but it’s not easy. The 10 largest banks in Lebanon account for 90 percent of the total balance sheets of the banks; so the other 45 groups are boutiques.
E In your opinion, what are the top issues and concerns for Lebanese banks in 2009?
To continue to see the internal stability and security, this is key for the development of the banking system and the economy. We’re monitoring the global crisis, because we’ve been quite immune up till now but if this crisis lasts we’ll definitely see an impact on businesses in Lebanon.
