Banking on reform: Amending our banks to support reconstruction

In the aftermath of Lebanon’s devastating financial and socio-economic crisis, the reconstruction of the banking sector and restoration of macroeconomic stability demand urgent and sophisticated interventions. This crisis, characterized by the collapse of depositor confidence, war-induced infrastructural devastation, and institutional dysfunction, requires a systematic resolution of the deposit crisis as the cornerstone of a broader recovery framework. Efforts by Banque du Liban, the central bank of Lebanon, have provided limited liquidity through initiatives such as Circulars 158 and 166, the first issued in June 2021 / updated in November 2023, the second issued in February 2024 and amended in October. This is an approach grossly insufficient to meet the urgent economic and social needs of the population. The government’s handling of dollar-denominated deposits has exacerbated the situation through measures that are legally and ethically indefensible. These include writing off up to 90 percent of deposits by transferring them to phantom