And then there were 8…
Lebanese banks lost ground in The Banker magazine’s latest survey of the top 1,000 commercial banks in the world. Eight Lebanese banks made the list, down from nine last year, and none feature among the top 25 banks in the Middle East. The criteria for the ranking is the banks’ tier one capital, the core capital of a bank and a measure of its financial strength, held at the end of 2011. Bank Audi, while regressing by 33 notches, was the top Lebanese bank in the ranking, securing 288th place. It was followed by Blom Bank, down 44 notches to 411th place, and Byblos Bank, down 22 notches to 460th place. Bank of Beirut registered the largest drop, sliding 120 spots to 753rd place. The other four banks in the ranking were Fransabank (down seven places to 616), Banque Libano-Française (down two spots to 674), BankMed (down 22 spots to 681) and Crédit Libanais (down 15 spots to 874).
Bank robberies in Lebanon
“Which bank is next?” has become the joke of the day among the inner circles of the Lebanese finance industry. In just the past two months, five robberies have taken place and a total of eight since the beginning of the year. On June 14, Federal Bank’s Damour branch was robbed and four masked gunmen took off with LL100 million according to Voice of Lebanon radio. On June 20, Bank Audi’s Verdun branch was the target of an attempted robbery, prevented by the security guards. On June 26, Banque Libano-Française was the prey as $40,000, and LL64 million were snatched from their Dbayyeh branch, according to the National News Agency (NNA). On July 3, it was Société Générale de Banque au Liban’s turn as two gunmen robbed the Kfar Shima branch of around $50,000 and LL40 million, and left behind two injured customers according to NNA. On July 10, Bank Byblos’ Choueifat branch was the target with the amount stolen undisclosed and two people injured during the robbery, according to the NNA.
Lobby group calling on financial institutions to divest from Lebanon
United States-based United Against Nuclear Iran (UANI), an advocacy organization, is calling on financial institutions to divest their holdings in Lebanon’s sovereign debt market and for credit rating agencies to re-rate the country’s debt to “no rating” following their three-month-long investigation, which according to UANI, revealed the existence of a money laundering scheme involving Lebanon’s central bank, Iran, Syria and Hezbollah. According to their press release, Lebanon has employed a state-sponsored money-laundering scheme to “wash” Iranian and Hezbollah illicit monies, in order to artificially and fraudulently support Lebanese debt securities. Some institutions such as Erste-Sparinvest, Aktia, and Ameriprise Financial, have already divested their holdings following UANI’s efforts. Lebanon’s central bank governor recently denied charges that money was being smuggled from Syria to Lebanon and added that Syrian deposits in Lebanese banks were actually decreasing. Also in response to the accusation, Hezbollah said in a statement: “These accusations are pure lies and come within the context of a suspicious US campaign to smear the image of Hezbollah through fabrications and false allegations.” [see page 12]
Egypt raises $1.1 billion in debt
Egypt raised $1.1 billion through the issuance of treasury bills as yields on the domestic debt dropped due to efforts by the central bank of Egypt (CBE). The bulk of the debt issuance ($660 million) was done through the sale of nine-month treasury bills at an average yield of 15.67 percent. Another $155 million of three-month securities sold at an average yield of 14.24 percent. Back in June, the CBE reduced banks’ reserve requirement ratio in local currency to 10 percent from 12 percent, its second move this year as it lowered the rate by two percent in March as well. To increase liquidity in the financial system, the CBE also started selling 28-day repurchase agreements (repo) — form of short-term borrowing — on July 10 in addition to the seven-day repos it introduced in March of last year.
HSBC accused of financing Iran and Saudi-based radicals
A United States Senate subcommittee led an investigation into British bank HSBC and concluded that the institution was lenient with its anti-money laundering control. It accused HSBC of several abuses, among which was the transfer of $7 billion into the US from HSBC Mexico with the funds originating from the sale of illegal drug sales. It also charged the bank of avoiding to “block transactions involving terrorists, drug lords, and rogue regimes,” and gave the example of two HSBC affiliates that sent nearly 25,000 transactions, worth $19.4 billion, through their US affiliate accounts over a period of seven years without disclosing the links of these transactions to Iran. The subcommittee also found that the bank was providing US dollar financing as well as banking services to banks in Saudi Arabia and Bangladesh tied to terrorist organizations. It also attacked the bank’s regulator, the Office of the Comptroller of the Currency, for failing to take action against these abuses. The head of compliance, David Bagley, has resigned following these accusations. “HSBC has fallen short of our own expectations and the expectations of our regulators,” said Bagley.
Iran to introduce three-tiered exchange rate for different imports
As Iran battles with sanctions from the West, the Islamic republic is introducing a three-tiered exchange rate system for the purchase of different classes of imports. For the purchase of “basic goods” such as meat, medicine and sugar, the government is allocating between $24 billion and $30 billion at the official exchange rate of 12,260 rials to the US dollar — a drop in value of nearly half over the past year — though there is a limited amount of dollars available at this rate and the unofficial rate trades at higher levels. The Iranian government makes it more expensive to purchase “capital and intermediate goods” as the rate becomes 15,000 rials to the dollar and even more expensive for luxury products as these will have to be purchased using dollars bought at free market rates. US-based lobby group United Against Nuclear Iran is launching an Iran Currency Tracker, in order to monitor the value of the country’s currency and the impact of international sanctions on the rial.
On the Qatari calendar: Valentino, Harrods hotel and Shard Tower
Fashion designer Valentino, the inauguration of the Shard Tower in London and Harrods hotels in several cities were all on Qatar’s agenda last month. Qatari investment firm, Mayhoola for Investments, is snapping up Valentino Fashion Group (VFG) from Red & Black Lux, a unit of European private equity firm Permira, for an undisclosed amount. VFG operates more than 700 boutiques in more than 90 countries. Qatar Holding, owners of London-based luxury department store Harrods, are planning to venture into the hotel business using the name of Harrods. They intend to open Harrods hotels in several cities including London, Paris and New York with a preference to construct on sites already owned by Qatar Holding or its affiliates, such as Chelsea Barracks in London or Costa Smeralda in Sardinia, according to a statement by Qatar Holding. Sticking to London-based news, Qatari-financed Shard Tower, Western Europe’s tallest tower, was officially inaugurated in the presence of Prince Andrew, Boris Johnson, the prime minister of Qatar, Sheikh Hamad bin Jassim bin Jaber al-Thani and Irvine Sellar, developer of the skyscraper, who said London “owes a debt” to Qatar.
