| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
| LBP Deposits Trillion LBP | 83.7 | 79.5 | 77.2 | 57.4 | 41.2 | — | — | — |
| LBP Deposits Billion USD | 55.6 | 52.8 | 51.2 | 38.1 | 27.3 | — | — | — |
| USD Deposit Billion USD | 107.1 | 115.9 | 123.1 | 120.8 | 111.8 | 104.6 | 94.6 | 90.5 |
| USD Loans Billion USD | 41.5 | 42.8 | 40.8 | 34.1 | 21.4 | 15.1 | 10.1 | 7.4 |
The table above presents data for LBP deposits, USD deposits, and USD loans, all for the Lebanese banking sector. The purpose of the table and the analysis to follow is to check where USD deposits had gone over the 2016-2023 period.
We will divide the period to three sub-periods, 2016-2019, 2020, and 2021-2023; we will then discuss the implications on bank USD deposits for each period:
First is the 2016-2019 period. During this period, LBP deposits fell by 17.5 billion USD. If we reasonably assume that these have been converted to USD deposits, then USD deposits should have increased to 124.6 billion USD (107.1 + 17.5). Yet, USD deposits increased to 120.8 billion USD only. Why? Easy: the 3.8 billion USD difference was used to pay-off USD loans which fell by 7.4 billion USD, in other words, to pay-off almost half the fall in USD loans.
Second is the year 2020. This is of course the most interesting year. LBP deposits fell by 10.8 billion USD and, assuming the same as above, USD deposits should have changed to 131.6 billion USD (120.8 + 10.8). However, they fell to 111.8 billion; and the resulting difference is a whopping 19.8 billion USD. Where did they go? Given that USD loans fell by 12.7 billion USD, then this much must have been used to pay back all the fall in USD loans. That leaves us with 7.1 billion USD (19.8 – 12.7), which captures the amount of deposits that left the banking sector, mostly as a result of limited retail withdrawals (close to 4 billion USD) by depositors and of foreign commitments by banks (LCs, LGs, etc..) .
Third is the 2021-2023 period. LBP deposit conversion doesn’t enter the picture here. USD deposits fell by 21.3 billion USD; but USD loans fell by 14 billion USD. Hence, the difference of 7.3 billion USD represents deposits that departed the banking sector, but this time mostly either as discounted checks and/or as limited withdrawal by depositors’ ala BDL circulars.
To conclude, during the more important period of 2019-2023, 41.1 billion USD deposits evaporated from the banking sector, with 26.7 billion USD used to paying-off USD private debt and the remaining 14.4 billion to drawing-out of deposits. What is interesting is that depositors got back 11.9% of their 2019 USD deposits; while debtors off-loaded 78.3% of their 2019 USD debt, and at much, much lower exchange rates to boot! Two obvious but solid implications follow: first, as the retired but devalued USD private debt has left a large whole in banks’ balance sheet, calls for taxing the profits made by debtors carries a lot economic and moral sense; second, given the limited withdrawals by depositors, plans for retrieving deposits through minimum thresholds and a Deposit Recovery Fund should be enacted and implemented the soonest.