The Lebanese Government is set to discuss on December 22^nd and 23^rd the draft version of the financial gap law. The draft law segregated depositors into 4 categories, small (deposits < $100K), medium ($100K< deposit <$1 million), large ($1 million< deposit < $ 5 million) and super large (deposits > $ 5 million). All tranches will get up to $100K over a period of four years (with BDL contributing to a maximum of 60% of this amount), with the amount being transferred to depositors’ accounts to be used in the form of checks, bank transfers or payments via electronic cards. As for the amounts above the $100K threshold, they will first be carved out of interests paid starting the year 2016 with the remaining amounts to be converted into asset backed securities (with the collateral being BDL assets such as the proceeds from the utilization/sale of its gold reserves, its securities portfolio, its investments in companies such as the MEA and Casino de Liban, its real estate portfolio only to name a few). The ABS (where banks’ share will be capped at 20%) will mature in 10 years for medium deposits, 15 years for large and 20 years for super large deposits. The draft law applies the single depositor concept across the banking system and proposes a series of measures for addressing “irregular assets”. In details, the draft law stipulates that transfers to outside Lebanon since October 17, 2019 (and in some instances since April 17, 2019) for amounts exceeding $100K must be fully or partially returned to Lebanon under the threat of incurring a 30% tax levy. Other irregularities include transfers of deposits from Lebanese pounds to local dollars made after October 17, 2019 (those before end of 2020 to be repaid at the LBP 50,000/USD rate, those in 2021 at the LBP 35,000/USD rate, those in 2022 at the LBP 30,000 rate and those starting 2023 at the LBP 18,000/USD rate), the purchase of local dollar checks, repayments of loans exceeding $500K at below market rates which will also be subjected to a 30% tax levy, as well as any suspicious accounts.  On its part, the Association of Banks in Lebanon (ABL) issued a statement on December 21^st whereby it expressed its fundamental reservations and strong objections to the draft law. In details, the ABL considered the draft law to be an unacceptable infringement on the rights of both banks and depositors and to be lacking the established precedents used to address banking crises in other countries. The ABL added that any sound legal and financial approach to addressing the crisis requires a precise and transparent determination of the size of this gap at BDL based on audited and unified accounting data. In addition, the measures proposed in the draft law do not consider the actual capacity of banks to meet their obligations toward depositors, refusing as such to be placed in direct confrontation with them while the state evades its due debts to the BDL.