On January 13th, 2025, the Central Bank issued intermediate circulars 723 (Decision 13686) and 722 (Decision 13685) as amendments for basic circulars 81 (concerning Operations relating to Credit, Investment, Stocks, and Shares) and 84 (concerning required reserves respectively).
Intermediate circular 723 stated that banks and financial institutions are prohibited to grant its clients loans and facilities except in “fresh funds” as defined by basic circular 165 (decision 13548). Fresh funds as defined by the Central Bank in basic circular 165 (decision 13548) are deposits deposited in bank notes and incoming transfers from abroad after November 17th, 2019 that meet the conditions mentioned in basic circular 150 (decision 13217).
It is to be noted that the new intermediate circular is effective upon publication.
Intermediate circular 722 amended two articles from basic circular 81 regarding the calculation and submission of the liabilities subject to required reserves.
The circular specifies that banks have to submit to the Statistics and Economic Research Department at BDL the average liabilities in Lebanese pounds that are subject to required reserves for the period from Thursday to Wednesday on the subsequent Monday.
As for calculations, the Central Bank urges banks to calculate a five-day average of their liabilities that are subject to reserve requirements in Lebanese pounds, starting Thursday till the following Wednesday (i.e. not including Saturdays and Sundays). Regarding the calculations of required reserves, it should be done on the basis of the average of five-day period from Monday to Friday based on the daily cash balances. In case a day is an official holiday its balance should be the closing balance of the previous working day except if the holiday is a Thursday. In this case, the balance adopted is the closing balance of the previous working day modified by subtracting or adding Treasury bonds subscriptions and maturities only without taking into account the maturities of Certificate of Deposits (CDs) issued by the Central Bank. In case there is a sudden holiday, the balance used should be the closing balance of the following working day.
The circular states that if the whole calculation period is an official holiday, the average balance of the previous period will be applied even if within the period, there is an official holiday on Thursday.
Moreover, the circular states that banks while calculating the required reserve ratio, it should include within banks’ daily cash balances at the Central Bank the balances in Lebanese pounds before April 19th, 2023 (date of issuance of basic circular 165) and fresh funds deposited as per the basic circular 165. However, it excludes the balances that are allocated to execute foreign exchange transactions for the clients and the term and block deposits for capital increases.
The required reserve ratio is calculated based on the average liabilities in Lebanese pounds that are subject to required reserves for a five-day period from Monday that follows Wednesday (the last day in the period for calculating average liabilities that are subject to required reserves) till Friday. Below is an example:
Calculation period for average liabilities subject to required reserves:
Thursday February 6th, 2025 till Wednesday February 12th, 2025
Calculation period for average required reserves:
Monday February 17th, 2025 till Friday February 21st, 2025
Finally, the circular stated that calculating the deductions from the liabilities of the period subject to a part of the required reserve, banks should announce it on a weekly basis to the Financing Unit at the Central Bank for the period ending Wednesday not later than the following Monday. Also, the required reserve ratio should be calculated on Monday following Wednesday (end day for calculating the average liabilities).
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