BDL Issued Intermediate Circular #446 addressed to Lebanese Banks and Financial Institutions

The Central Bank of Lebanon recently issued Intermediate Circular #446 entitled “Financial Operations and Activities in Financial Markets”. According to the circular, Lebanese banks must register the surplus generated from the swap of sovereign financial instruments in Lebanese Pounds (LBP) with sovereign financial instruments in foreign currencies (FX) under “Deferred Liabilities”. The surplus from these swap operations is to be registered in LBP and to be accounted for under Tier 2 Capital.

The Lebanese commercial banks are required to use this surplus in order to meet:

  • The overall provisioning requirements in LBP cited in the basic decision #7776 dated 21/02/2001.
  • The capital adequacy requirements noted in the basic decision #6939 dated 25/03/1998.
  • Any additional requirements that might result from the IFRS 9 regulations which will go into effect as of January 1st, 2018.
  • LBP provision requirements against any impairment of investments abroad, provided that impairment tests are performed by auditors according to the international accounting standards #36
  • LBP provision requirements against goodwill impairments resulting from merger operations, provided that impairment tests are performed according to the IFRS 3

If any surplus persists after all of the above requirements are met, no more than 70% of this surplus can be registered on the Income Statement as un-distributable profits before being allocated depending on the case as reserves for capital increase under “Common Equity Tier One”.

Tier I and Tier II Capital of Lebanese Banks, in millions of USD

BDL Issued Intermediate Circular #446 addressed to Lebanese Banks and Financial Institutions

Source: BDL

 

 

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