LCB in US crosshairs
Lebanese Canadian Bank was accused by the United States Treasury Department of money laundering in connection with a drug operation with ties to Hezbollah, on February 10. The department released a 14-page notice of finding, which concluded, “Lebanese Canadian Bank SAL is a financial institution of primary money-laundering concern.” Stuart Levey, the US treasury undersecretary for terrorism and financial intelligence, said he believed the fault lay with the bank’s “management complicity, failure of internal controls, lack of application of banking standards” and other “vulnerabilities” in Lebanese banking standards. In response, The Association of Banks in Lebanon put out a statement stating its support for the bank. Riad Salameh, governor of Banque du Liban (BDL), Lebanon’s central bank, travelled to Washington, DC, on February 24 to discuss the matter with US officials. Salameh and others have suggested that the investigation could be the result of Western dissatisfaction with the recent shift in power in Lebanon’s government. A statement from Salameh was broadcast on the popular television show “Kalaam Al Nas” in order to discourage Lebanese depositors from withdrawing their money from the bank, as some experts have suggested was happening. “We wish to assure Lebanese markets, and those who are dealing with [LCB], that their dealings with it are secure,” Salameh said in a BDL release. Though BDL management has made no comment on the issue, the bank has posted a statement on their website saying, “[LCB]…is committed to fully cooperate and coordinate with the relevant regulatory authorities in an effort to demonstrate the integrity and transparency of its operations and accordingly denies knowledge of any involvement in any manner whatsoever in illicit transactions or wrong doing.”
Libya unrest hits banks
The United States Treasury Department announced on February 25 that it would be monitoring transactions for possible links to the unrest in Libya. The treasury department’s Financial Crimes Enforcement Network requested that financial institutions “apply enhanced scrutiny” to accounts which could be held by Libyan officials or Muammar al-Qadhafi himself. “Financial institutions should be aware of the possible impact the events in Libya may have on patterns of financial activity when assessing risks related to particular customers and transactions,” said the statement. A WikiLeaks cable released in late February containing a message from the US Embassy in Tripoli valued Libya’s sovereign wealth fund at $32 billion and said that “several American banks are each managing $300 million to $500 million.” According to US State Department spokesman Philip Crowley, Libya’s finances had become so entwined with the US that the country suffered significant losses with the fall of Lehman Brothers and was also approached by now debunked ponzi-schemers Bernard Madoff and Allen Stanford. Libya announced that it would be accepting bank license applications from foreign players in February of last year. The country’s central bank only ended up issuing one license, however, with Italy’s UniCredit SpA the now perhaps not-so-lucky recipient. Three Gulf Cooperation Council banks had entered the running — it was reported that Mashreq Bank, Emirates NBD and Qatar Islamic Bank were put on the short list for licensure but in the end none was granted. Byblos Bank and Fransabank have representative offices in Libya.
BDL posts full 2010 figures
Lebanon’s banking sector showed a slowdown in deposit growth and a relatively robust year for lending according to Banque du Liban (BDL), Lebanon’s central bank, which released full financial figures for 2010 performance. Deposits represented 83 percent of the sector’s total balance sheet. Customer deposits grew 11.9 percent to reach $107.2 billion by end-2010; this growth is 37 percent lower than the growth posted in 2009 when the financial crisis encouraged depositors to seek out the safe haven of Lebanese banks. Loans grew by 23.1 percent in 2010 to reach $34.9 billion at end-2010. Dollarization of lending was 64.1 percent. The expectation at the start of 2010 was for the ratio of dollar lending to decrease based on relative political calm and encouraging policies from BDL in lifting reserve requirements on the majority of Lebanese lira lending; political unrest in the fourth quarter slowed this trend, leading to comparable figures to 2009.
Shaky start for Egypt’s banks
Egypt’s net foreign reserves at the country’s central bank fell by $1 billion in January down to $35 billion, leading to a balance-of-payments deficit for the month. Deputy Central Bank Governor Hisham Ramez said in early February, upon the reopening of the country’s banks, that the foreign reserves would be used to cover withdrawals and transfers in an effort to stabilize the Egyptian economy. Foreign holdings of treasury bills dropped as well in the first month of the year, decreasing by $2.8 billion as foreign investors were spooked by unrest in the country. EFG-Hermes expects reserves to continue to decline in 2011, compounded by the Central Bank of Egypt’s efforts to weaken the Egyptian pound.
Arab stock market losses
General unrest in the Middle East and North Africa led to losses totaling approximately $24 billion in February on regional bourses. The majority of the losses were in Saudi Arabia, Qatar and Kuwait, while Abu Dhabi managed slight gains. After the $24 billion in losses, market capitalization of the region’s 14 stock exchanges was left at $930 billion on February 23, down from $954 billion at the end of January.
Bank of Beirut heads to Oz
Bank of Beirut announced on February 21 that they had acquired an 85 percent stake in Australian Laiki Bank. Laiki Bank was majority-owned by the Cypriot Marfin Poplar Bank, which put out a joint statement announcing the sale. Regulatory bodies from all three countries have approved the deal, which has been reported to be valued at $420 million. “Entering the Australian banking sector is a direct materialization of our strategy to expand outside Lebanon and serve our customers wherever they are. After highly successful operations, whether in the United Kingdom, Germany, Cyprus, Oman and other overseas markets, the acquisition of a majority ownership in Laiki Bank will allow us to further improve our performance and offer our customers an expanded international platform that caters to all their needs,” said Salim Sfeir, chairman and general manager of Bank of Beirut. Including Laiki Bank, Bank of Beirut now has 65 branches worldwide with 50 in Lebanon and 10 in Australia. The Lebanese bank also has two branches in the UK and Germany, one branch in Cyprus and one in Oman. These locations combined give the bank a total consolidated balance sheet of $9 billion with $6.88 billion in deposits.
