The Lebanese banking sector, historically known for its stability and secrecy, has faced significant challenges in recent years. It was characterized by a large and sophisticated network of banks that attracted both local and international deposits. However, by 2019, Lebanon experienced a severe financial and economic crisis, leading to a loss of confidence in its banking system.
According to August ABL’s publication of banking and monetary indicators, banks branch network decreased significantly from 1,058 branches by December 2019 to reach 769 branches in Lebanon by end of March 2023, while banking sector in Lebanon experienced a contraction of about 9,167 employees, from 24,704 employees by end of 2019 to 15,537 employees by March 2023.
On the assets side, deposits with Central Bank (BDL) dropped by 28.69% from $117,642M by the start of 2020 to $83,882M in August 2023 as of the official exchange rate of 15,000 USD/LBP. Furthermore, foreign assets of BDL excluding gold decreased remarkably from $30.98B in October 2019 to a low of $8.823B in August 2023 while foreign securities were down by 27.02% to stand at $5.079B for the same month. Commercial banks’ claims on private sector in LBP and USD contracted respectively by 47.26% and 78.94% to stand at LBP 12,883B and USD 8.06B in August 2023. In addition, Lebanese Republic Sovereign Eurobonds (provisions deducted) were evaluated at $2.659B in August 2023 down from $ 14.859B in September 2019.
As for the netting of commercial bank claims and deposit of the non-resident financial sector, it experienced a significant transformation, as non-resident financial sector liabilities plummeted from $9.661 billion to $3.109 billion. Simultaneously, claims on the non-resident financial sector contracted from $8.976 billion to $4.401 billion. This indicates a substantial reduction in financial exposure and a reconfiguration of the financial landscape, as the gap between claims and liabilities narrowed. Such adjustments in the balance of financial assets and liabilities play a crucial role in shaping the economic and sector stability.
On the liabilities side, BDL’s foreign liabilities fluctuated during the last years from $2.401B in November 2019 to $1.707B by the end of August. Nevertheless, commercial banks resident customers’ deposits in LBP and USD recorded a substantial drop from LBP 69,592 B and USD 124.138 B in September 2019 to LBP51,051 B and $92.183 B, respectively, by end of August 2023.
Banking and monetary indicators August 2023:
Source: BDL, ABL