The Central Bank issued on 27/06/2024 two intermediate circulars 697/13644 and 698/13645 related to basic circulars #158 and #166 respectively. For a refresher, basic circular #158 was issued on 08/06/2021 and is about exceptional measures related to the gradual payments of deposits in foreign currency from accounts already opened before 31/10/2019. On the other hand, circular # 166 was issued on 02/02/2024 is about exceptional measures concerning gradual payment of foreign currency deposits that were opened after 31/10/2019 and before 30/06/2023.
Regarding intermediate circular 697/13644, several amendments were done on BDL basic circular #158. Thus, the following are the main points of the basic circular after the amendments.
- Any natural person, minor or adult, resident or non-resident, can benefit from the circular.
- Moral persons such as companies and organizations are not eligible to benefit from this circular.
- The amounts eligible that the clients can withdraw comprises of the aggregate foreign currency deposits as at June 30th, 2021 and do not exceed the balance as at October 31st, 2019 net of:
- Existing cash collaterals and margins.
- Amounts of deposits converted from Lebanese pounds to foreign currencies after October 31st, 2019.
- Any withdrawals of cash bank notes or transfers abroad including transfers for students studying abroad in addition to amounts used abroad through cards after October 31st, 2019 from deposits existing before October 31st, 2019 and not from fresh deposits as per BDL basic circular #150.
- Aggregate balance of retail and housing loans in foreign currency and being settled in LBP at the official exchange rate as per BDL circular #568.
- Clients who did not abide by BDL basic circular #154, i.e. they did not deposit the required percentage from the amounts transferred abroad between July 1st, 2017 and August 27th, 2020 cannot benefit from this basic circular.
- Clients who benefit from basic circular #158 for any individual or any joint or collective accounts at any bank during the yearly cycle between July 1st and June 30th cannot benefit from this circular at other banks during the same yearly cycle. In case of joint accounts, if one of the account holders decides to benefit from basic circular #158, the co-owner cannot benefit from basic circular #166 in the same account; however, he or she can benefit from his or her other accounts if he or she did not benefit from basic circular #158 during the same yearly cycle.
- The circular authorized the banks to use the liquidity they accumulated at correspondent banks as per basic circular #154 dated August 27th, 2020 to finance the withdrawals. It is to be noted that basic circular #154 obliged banks to deposit in their accounts at foreign correspondent banks 3% of the total amount of deposits in foreign currencies. In case the liquidity drops to less than 3%, the bank has to cover the shortage to reach again the threshold of 3% before end of 2025.
Regarding intermediate circular 698 / 13645, several amendments were done on BDL basic circular #166. Thus, the following are the main points of the basic circular after the amendments:
- The eligible amounts that account holders (minor or adult, resident or non-resident) can withdraw as per this basic circular are those that were opened after October 31st, 2019 and before June 30th, 2023, or considered a continuation of an account opened before June 30th, 2023 (i.e. joint accounts became individual accounts or vice versa, term deposits converted to current deposits, or accounts transferred to trustees or heirs).
- The account holder can benefit from this basic circular if he or she currently does not benefit from basic circular #158 or he or she did not benefit from basic circular #158 in the yearly cycle (i.e. from July 1st till June 30th).
- There are several account holders that are not eligible to benefit from this basic circular, namely:
- People who did not abide with BDL basic circular #154, i.e. those who did not deposit in a 5-year term “special account” 15% or 30% of the transferred amounts between July 1st, 2017 and August 27th, 2020. Normal people should have deposited 15% of the transferred amount, while banks’ chairmen, board members, major shareholders, senior executive management as well as politically exposed persons (PEPs) should have deposited 30% of the transferred amounts.
- People whose accounts reveal that there are checks’ buying and selling activities after October 31st, 2019.
- Account holders who transferred after October 31st, 2019 deposits in Lebanese pounds to foreign currencies that exceeds $300,000 except for end-of-service indemnities of public and private sector employees.
- People who settled their foreign currency loans in LBP at the official exchange rate as per BDL basic circular #568, equivalent to $300,000.
- People who converted their loan balances from foreign currencies to Lebanese pounds and exceed $300,000 in counter value.
- People who performed Sayrafa operations that exceeded $75,000.
It is to be noted that both circulars are effective for 12 months starting July 1st, 2024 and are subject to amendments and renewal and will be valid till the release of all the amounts transferred to the “special sub-account”.
Although banks consider the new amendments of BDL basic circulars # 158 & # 166 are good in which more clients will benefit from these circulars and this is their right to withdraw from their accounts, but some banks are struggling in obtaining the needed liquidity in fresh US dollars. This issue could be resolved, as per banks’ sources, if BDL abides with its duties towards banks. Banks’ sources stated that BDL used to pay the banks 6% interest on banks’ term deposits at BDL (being depositors’ deposits) totaling between $40 billion and $50 billion. After the crisis, BDL started to pay 50% of the interest in US dollars and 50% in Lebanese pounds. After that, BDL decreased it from 6% to 3% and at LBP/USD exchange rate of 15,000. Starting February 2024, BDL announced that it will pay only the US dollars interest (being 1.5%) in local dollars. Therefore, banks are asking BDL to pay the interest on banks’ deposits as it is used to be before the crisis given that BDL is investing a quarter of banks’ deposits (around $10 billion) abroad and receiving more than $500 million in fresh US dollars while it is detains 90% of banks’ deposits. It is to be noted that the monthly cost of BDL basic circular #158 is around $40 million while that of BDL basic circular #166 around $10 million and it might increase by $1 million- $2 million after the new amendment.
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