According to a press release issued by Fitch Ratings on March 16, 2020, and following the sovereign’s default on a $1.2 billion Eurobond payment, the primary solvency risk to Lebanese banks is their high exposure to the Central Bank. In details, the agency stated that 54% of commercial banks’ assets was placed with the Central Bank in the form of long-term deposits and certificates of deposit based on end of 2019 figures. According to Fitch, the Central Bank’s ability to meet FC obligations is weakening as a result of the mounting pressure on its FC reserves with its foreign currency assets after deducting $5.7 billion worth of Eurobonds standing at $32 billion by the end of 2019, representing less than half of its FC liabilities to banks of $70 billion as per Fitch’s estimates. The agency stated that the Central Bank faces pressure as FC certificates of deposit bought by banks mature in 2022-2023. In this regard, Fitch views an increasing risk that banks may face restrictions in accessing their assets at the Central Bank, particularly since the majority of deposits are long term. The rating agency commented that a 20% haircut on BDL’s liabilities to the banking sector would seriously hamper the latter’s equity while also commenting that the banking sector’s ability to meet its outstanding FC liabilities is “in serious doubt” in the light of their limited access to foreign currencies. According to the press release, FC liabilities amounted to $129 billion, of which $120 billion are in the form of FC deposits. The agency also stated that the banking sector’s FC placements with foreign banks halved in 2019 to $7 billion, with banks having to meet their FC deposit outflows in spite of the capital controls. Furthermore, the requirement for banks to pay 50% of the interest on FC customer deposits in local currency is considered by Fitch as a reduction of the original terms, especially in the light of the weaker parallel market exchange rate. Finally, the agency noted that domestic banks’ direct exposure to the Eurobond default represented some 6% of their balance sheets, and that banks have resorted to selling $1.1 billion of their portfolio in January 2020 at below 50% of their face value, in order to boost their FC liquidity and in fear of a default back then.