Discusses the most common methods of payment, such as open account, letter of credit, cash in advance, documentary collections, factoring, etc. Includes credit-rating and collection agencies in this country. Includes primary credit or charge cards used in this country. Also includes information on Foreign Exchange controls and Banking Systems, and U.S. Banks & Local Correspondent Banks.
Methods of Payment
For many years, U.S. dollars and Lebanese lira were used interchangeably in Lebanon, and Lebanon did not restrict currency conversions or foreign fund transfers. However, banks are no longer allowing either. Credit rating and collections agencies do not currently operate in Lebanon. International rating agencies, however, do evaluate sovereign Eurobond instruments issued by the Lebanese government. Mastercard, Visa, and American Express are the primary credit or charge cards used in Lebanon. Lebanese banks are no longer confirming lines of credits for importers without a 100 percent cash collateral up front; an onerous restriction they say has been imposed by international correspondent banks.
As of August 2020, Lebanon had several different exchange rates in practice. Since 1997, the LBP has been pegged to the U.S. dollar at 1,507.5 LBP to USD. However, as Lebanese continued to demand scarce dollars in the Lebanese financial system, the currency depreciated on secondary markets, reaching values ranging from 6,000 to 10,000 LBP/1 USD during the first half of 2020. This was on the black market, the source of U.S. dollars for most Lebanese. Licensed money exchange houses, after a government crackdown on purported price gouging, held rates firm at 3,900 LBP/1 USD as of August 2020, and were not selling U.S. dollars, only buying. The Central Bank only made dollars available to importers at the official rate for imports of fuel, wheat, and medicine; it announced in August 2020 that it would end this subsidy in October 2020. Banks allowed clients to withdraw LBP from their dollar-denominated accounts at the same rate. Finally, banks offered another preferential exchange rate for those willing to bring new dollar banknotes to bank counters. Different stores and shops offered varying exchange rate conversions at ad hoc rates as well.
Lebanon’s financial sector entered an unprecedented crisis in late-2019. Lebanon relied on dollar inflows from abroad to finance imports and public spending and to maintain the Lebanese lira-to-USD peg, in place since 1997. Those dollars were deposited in Lebanese banks, which in turn lent them to the state in the form of deposits at the Central Bank or Lebanese debt instruments. Nearly 70 percent of bank assets are tied to the sovereign in those two forms. As dollar inflows dried up and banking sector assets were tied to long-term deposits at the Central Bank and illiquid debt instruments, banks had trouble meeting their dollar obligations to clients.
This illiquidity continued for rest of 2019 and the first quarter of 2020, during which most banks stopped providing any dollars to clients. Banks are no longer serving their core functions: making productive loans or allowing those with dollar deposits to withdraw them. Clients cannot transfer money overseas, except in “emergency” cases, as determined by individual banks. Lebanon has yet to adopt formal capital controls legislation, but most economic analysts believe such a law is necessary to preserve what limited foreign currency is left in the country and provide a level playing field to all Lebanese. At the behest of the Central Bank, in April 2020, banks began providing Lebanese lira at rates double the official pegged rate to customers with dollar-denominated accounts.
Lebanon’s default on its dollar-denominated debt in March 2020 – Lebanese banks at the time held $12.7 billion in Lebanon’s dollar bonds – further eroded the balance sheets of Lebanese banks. Analysts estimate that perhaps 30 percent of loans from Lebanese banks are non-performing. This number is expected to rise in 2020. Bankers report that correspondent banks overseas have stopped providing them with lines of credits – or only provide facilities with onerous conditions – further hampering bank efficacy in Lebanon. On April 30, the Cabinet approved an economic rescue plan, which noted the Lebanese financial sector experienced losses of nearly $80 billion, meaning that it will be unable to repay all what it owes to Lebanese with dollar-denominated accounts. The economic plan hints at a potential “haircut” on dollar deposits, in which wealthy account holders could lose some of their deposits to help recapitalize banks after shareholders “bail-in” (convert their deposits into bank shares) their financial institutions.
The Lebanese banking sector covers the entire country with 1,051 operating commercial and investment bank branches as of November 2019. There are 4,757 residents per branch in Lebanon (assuming five million inhabitants), which compares favorably to regional and emerging markets. According to World Bank Development indicators, there are 534 depositors with commercial banks per 1,000 adults, 215 borrowers from commercial banks per 1,000 adults, and 38 ATMs per 100,000 adults. The total domestic assets of Lebanon’s five largest commercial banks reached approximately $115 billion as of the end of 2019 (about 51.4 percent of total banking assets), according to Central Bank data.
Lebanon’s Central Bank was established in 1963. Lebanon’s Central Bank imposes strict compliance with regulations on banks and financial institutions, and commercial banks, in turn, maintain strict compliance regimes. However, the United States designated Jammal Trust Bank in August 2019 as a Specially Designated Global Terrorist for its role in financing Foreign Terrorist Organization Hizballah. Foreign banks and branches need the Central Bank’s approval to establish operations in Lebanon. Moreover, any shareholder with more than five percent of a bank’s share capital must obtain prior approval from the Central Bank to acquire additional shares in that bank, and must inform the Central Bank when selling shares. In addition, any shareholder needs to obtain prior approval from the Central Bank if he/she wants to become a board member. The use of cryptocurrencies is prohibited in Lebanon by the Central Bank. The Central Bank announced that it is developing a digital currency that it plans to issue in Lebanese Pounds for domestic use only.
There are no restrictions in Lebanon on a foreigner or non-resident’s ability to open a bank account in local currency or foreign currencies, provided they abide by Lebanese compliance rules and regulations; however, anecdotal evidence revealed that in the wake of Lebanon’s economic crisis, few local banks were accepting new clients. Banks claim they have stringent inquiry mechanisms to ensure compliance with international and domestic regulations and implement Lebanon’s anti-money laundering and counter-terror finance laws. Banks inform customers of Know-Your-Customer requirements and ask them about the purpose of opening new accounts and about the sources of funds to be deposited. Lebanese banks note they are compliant with the Foreign Account Tax Compliance Act (FATCA). Lebanon adopted the OECD Common Reporting Standards since January 1, 2018.
Foreign Exchange Controls
For the first time in Lebanon’s history, commercial banks in late 2019 introduced ad hoc capital controls on Lebanese depositors to stem the outflow of foreign currency. Depending on a client’s individual bank and account size, he or she is subject to strict limits on foreign transfers for “emergency” purposes only, as defined by a client’s bank. In August 2020, the Central Bank agreed to allow parents to transfer up to $10,000 for children’s tuition payments overseas. Most international and local firms have been unable to transfer U.S. dollars in their bank accounts overseas. Clients with Lebanese lira (LBP) denominated accounts could only convert their lira to dollars outside of banks at licensed and unlicensed money exchange houses.
U.S. Banks & Local Correspondent Banks
Below is a list of U.S. banks operating in Lebanon:
Berytus Park, Bloc A, 3rd floor
Park Avenue, Beirut Central District
P.O. Box 11-1535
Atrium Bldg, 3rd floor
Corner Maarad-Weygand Street
Gefinor Center, Bloc B, 16th floor, Suite No.1601
P.O. Box 11-5133
Below is a list of the largest banks (ranked by assets as of December 2018) that have correspondent U.S. banking relationships:
Bank Audi Plaza, Bab Idriss
P.O. Box 11-2560
BLOM Bank Bldg.
Rashid Karameh Ave., Verdun
P.O. Box: 11-1912 Riad ElSolh,
Beirut 1107-2807, Lebanon
Riad ElSolh Street, Beirut Central District
P.O. Box: 11-2955
Byblos Bank Headquarters,
Elias Sarkis Avenue, Ashrafieh
P.O. Box: 11-5605 Riad ElSolh,
Beirut 1107-2811, Lebanon
P.O. Box: 11-0393 Riad ElSolh,
Beirut 1107-2803, Lebanon
482 Clemenceau Street
P.O. Box: 11-0348 Riad ElSolh,
Beirut 1107-2030, Lebanon
Bank of Beirut Bldg
Foch Street, Beirut Central District,
P.O. Box: 11-7354
Beirut Liberty Plaza
Rome Street, Hamra
Credit Libanais Tower
Corniche El Nahr, Adlieh Roundabout
BBAC Bldg., 250 Clemenceau Street
P.O.Box 11-1536 Riad ElSolh,
Beirut 1107 2080, Lebanon
Al Ittihadiah Bldg
Charles Malek Avenue, Rmeil
P.O.Box 11-5292 Riad ElSolh,
Beirut 1107-2190, Lebanon
Lebanon and Gulf Bank Bldg,
Allenby Street, Beirut Central District
P.O. Box 11-3600
Allenby Street, Marfaa 147 Bldg,
Beirut Central District
P.O.Box 11-435 Beirut, Lebanon
Sin El Fil Blvd.
Charles Malek Avenue, Achrafieh
Hoss Building, 6th floor,
Emile Edde Street, Hamra
Source: Bankdata Financial Services