Lebanon’s banks weak but safe, says Fitch
According to Fitch Ratings, Lebanon’s banks have a paradoxically low level of strength and low level of vulnerability. In their newest ratings release, Fitch has given Lebanese banks a banking system indicator rating of “D” indicating “low strength.” Egypt, Tunisia, Morocco, Benin and Nigeria also carry the same rating, which is intended to assess the quality of a country’s banking sector. In the emerging markets category, 75 percent of banking systems were given a rating of “C” or “D”, while 25 percent received an “E” rating, according to Fitch. Conversely, on Fitch’s Macro-Prudential Indicator, Lebanese banks received a rating of “1,” the best possible, indicating a “low level of potential vulnerability.” Benin, Egypt and Tunisia were also given this rating. Thirteen of the 86 countries assessed were, like Lebanon, rated with “low strength,” but also a “low level of potential vulnerability.” These countries include Benin, China, Dominican Republic, Ecuador, Egypt, El Salvador, Hungary, Indonesia, the Philippines, Sri Lanka and Tunisia.
Low interest loans to continue in Lebanon
The interest rate subsidies granted by the central bank to 60 percent of lending sectors in July and September of 2009 have been extended until June 2011. The original circulars lowered the reserve requirements, which Lebanese banks were previously required to keep at the central bank at zero percent interest, allowing banks to lend in Lebanese lira at more attractive rates. The loans subsequently offered brought lira lending rates down from above 9 percent to around 5 percent. The extension will allow banks to maintain these rates on loans processed until June 2011. These interest rate subsidies covered mostly personal loans for cars, homes and education and are an addition to the interest rate subsidies put in effect in 1997, which benefit the industrial, tourism, agriculture and technology sectors of the economy. At end-June 2009, the 1997 interest rate subsidies had resulted in $2.55 billion in new 2009 lending.
UAE standardizing lending practices to stem loan defaults
With non-performing loans and loan defaults surging in the United Arab Emirates, Gulf officials are administering a survey which may lead to a uniform personal loan application and a centralized database to assess the risk of personal loans. “Once the survey is completed, results will be presented to the board of the central bank for approval,” said Obaid Humaid al-Tayer, minister of state for financial affairs in a statement. Personal loans in the UAE have seen massive growth in recent years from $39.75 billion in 2007 to $115.43 billion in 2008, according to a Federal National Council (FNC) report. Loan defaults, however, have also increased from 3,149 cases in 1998 to 5,710 cases in 2006. The same report said that approximately 10,000 people are currently in court or jail in the country because of loan defaults. A new draft law has also been approved by the FNC requiring credit checks for any new personal loans in the UAE, the lack of which is largely blamed for the prevalence of defaults.
US fines Credit Suisse for sanctions violations
On December 16, United States authorities fined Credit Suisse $536 million in penalties for violating US economic sanctions regarding financial activity in Iran and several other sanctioned countries. Investigators told media that the Swiss bank continued transactions after the bank decided to terminate its business in Iran in 2005. A Credit Suisse representative office however stayed open in Tehran until 2006. Investigators have also discovered that the bank altered more than 7,000 transfers, totaling approximately $700 million, from Iran into the US in order to disguise their origin, otherwise known as “stripping.” Furthermore, Credit Suisse is believed to have been teaching Iranian banks how to “strip” transfers, resulting in more than $1 billion in funds flowing into New York banks. A US Treasury department statement said that the bank appears to also have been illegally operating in Sudan, Libya, Myanmar, Cuba, and with the former Liberian regime of Charles Taylor. The case involves five different US authorities, including the Manhattan District Attorney’s Office, the US Justice Department and the Federal Reserve. The settlement is expected to be split between these authorities, with $268 million to be divided between New York City and state, the largest settlement ever secured by the Manhattan District Attorney’s office. Nine other banks are believed to be under investigation for similar sanctions violations, while Lloyd’s Banking Group has already reached a $350 million settlement for similar charges.
Small victory for Lebanese women
A Lebanese mother became the first woman to open a bank account for her children on December 17, when she opened accounts for each of her two sons at the Bank of Beirut and the Arab Countries (BBAC). “I’ve been trying to open a bank account for my two sons for 10 years now, but I was continuously told that only my husband could sign the papers,” said Barbara Batlouni, the Lebanese-American director of the non-governmental organization Amideast, to the Associated Press. Batlouni’s victory came after the Association of Banks in Lebanon changed rules that discriminated against woman on December 9, after receiving pressure from the Institute of Progressive Women and other like-minded groups.
“I’m glad Lebanon is improving its laws,” said Batlouni’s son Samer. The boys’ mother also received a $1,000 check from BBAC in honor of her “fight against discrimination,” said BBAC general Manager Ghassan Assaf. Despite this positive step, Batlouni said, “Lebanese women excel in all fields, and they do not have their basic rights.” Lebanese women remain unable to pass on citizenship to their children or spouses.
Morocco receives loan to spread the wealth
In an effort to help Morocco’s 34 million people open bank accounts and take advantage of financial services, the African Development Bank has granted a $162 million loan to a program with the goal of giving Moroccans greater access to the financial sector, announced the bank on December 11. The loan will also help Morocco to create the regulatory framework needed for futures trading. The bank said the loan is intended to improve capital markets by strengthening governance of the country’s capital markets and insurance sector. Part of the loan will also be used to improve the country’s National Electricity Board Program in order to prevent technical failures and diminish the frequency of power outages.