The Central Bank of Lebanon: New Regulations for Granting Retail Loans

2014-09-The Central Bank of Lebanon New Regulations for Granting Retail Loans

Lending activity is a double-edged sword. The world has witnessed the bad side when a mishandling or misperception of risk paved the way for reckless mortgage lending across America which in turn unleashed a full-fledged economic crisis. However, lending also constitutes an important channel through which aggregate demand can be revived and through which individuals can have access to home ownership, education, credit cards…etc.

In Lebanon, where credits distributed by banks[1] (including financial intermediation and public sector administrations) represented 125% of GDP by June 2014, stakeholders in the financial system are keen on holding a tight grip on risk. One indicator portraying the risk-averse nature of Lebanon’s lenders is the World Bank’s “Credit Depth of Information Index”. According to the World Bank, this gauge “measures rules affecting the scope, accessibility, and quality of credit information available through public or private credit registries. The index ranges from 0 to 6, with higher values indicating the availability of more credit information, from either a public registry or a private bureau, to facilitate lending decisions”. Lebanon got an elevated score of 5.0 in 2011, which shows that the lending ecosystem minimizes risk-taking via high transparency high quality and availability of credit information…

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