The Lebanese Central Bank issued on August 27, 2020 Basic Circular no. 154 to banks and financial institutions including exceptional measures to revitalize the operations of banks operating in Lebanon. In details, the Central Bank required banks to complete a fair value assessment of their assets and liabilities and set a plan that helps in complying with all applicable regulations, notably those related to liquidity and capital adequacy, while also demanding banks to increase the level of services provided to their clients to the pre-October 2019 level. Secondly, banks must boost their liquidity with their foreign correspondent banks by incentivizing clients who have transferred more than $0.5 million (or its equivalent in foreign currencies) of their deposits abroad since July 1, 2017 to channel back 15% of said amount to Lebanon, 30% for banks’ Chairmen, members of Board of Directors, large shareholders and top management, and 30% for Politically Exposed Persons (PEPs). Always in the same vein, the circular stipulates that funds that are retransferred to Lebanon will be deposited in “special” saving accounts having a term of 5 years, bearing in mind that said account will not be subject to reserve requirements. Similarly, banks must encourage importers to transfer from outside Lebanon an amount equivalent to 15% of the value of documentary credits opened in any of the years 2017, 2018 or 2019, with the transferred amounts also being deposited in “special” saving accounts. The circular added that the interest rate paid on the “special” saving accounts will not be subjected to the capping limits set in basic decision number 13100. Always in the same context, BDL required banks to adopt a legal framework that boosts the concerned person’s confidence in the ability of recuperating the deposited amount at the expiration of the 5-year term, and to utilize the funds transferred to Lebanon from abroad to facilitate external operations that support the Lebanese economy. The circular also requires banks to constitute by end of February 2021, an external account at their correspondent banks equivalent to 3% of the size of foreign currency deposits as of July 31, 2020. Banks must also, and according to the previously mentioned plan, submit a request to the Central Council at BDL to reconstitute/raise their capital to the required levels by the end of the first quarter of the year 2021. In this vein, banks must offer their depositors the option to convert their deposits into shares or into redeemable, tradable and convertible bonds (not subject to the capping limits on interest rates set in basic decision number 13100) that can grant priority to subscribe in any future capital increase, subject to the following conditions:

-       Providing a detailed and clear explanation to the concerned depositor on the terms of the operation

-       Providing customers who are planning to convert their deposits into shares with an updated report showing the fair value of the shares, bearing in mind that these reports must be approved by the Central Council at BDL

-       Listing all of the bank’s shares on the Beirut Bourse

-       Separating the Chairman of the Board of Directors function from the bank’s management as per article 153 of the code of commerce

Moreover, and in the event the offered shares and redeemable, tradable & convertible bonds are sold in fresh money terms, the sale amount can be transferred outside Lebanon. Finally, the circular stipulated that banks that fail to comply with the aforementioned regulations will be referred to the higher banking commission and will be subject to penalties as per the provisions of the code of money and credit.