Methods of Payment
For many years, the U.S. dollar and Lebanese pound 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. All are rated junk or in default. 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 July 2022, Lebanon used several different exchange rates: official pegged rate, actual market rate, Central Bank’s “Sayrafa” rate, and rate used by money transfer organizations to convert incoming remittances. Since 1997, the LBP has been pegged to the U.S. dollar at 1,507.5 LBP/1 USD. However, as Lebanese continue to demand scarce dollars in the Lebanese financial system, the LBP depreciated on the market, the only source of USD banknotes for most Lebanese. The actual market rate reached a peak of 33,000 LBP/USD in January 2022; as of July 2022, the rate was closer to 28,000 LBP/USD. In December 2021, Lebanon’s Central Bank announced that banks could convert LBP into USD – sourced from the Central Bank’s foreign currency reserves – using the Central Bank’s “Sayrafa” platform. This intervention stabilized the local currency temporarily; the “Sayrafa rate” and market rate tracked closely for most of February and March 2022 at 20,000 LBP/USD. However, the Sayrafa platform could not satiate local demand for USD banknotes, and the market rate once again increased. Money transfer organizations such as Western Union or MoneyGram can also convert incoming USD to LBP using a separate rate usually higher than the Sayrafa rate but below the market rate.
Banking Systems
Lebanon’s banks are insolvent. The government announced in February 2022 that it estimated banks accumulated $72 billion in losses and suggested a plan for distributing those losses, primarily through converting USD deposits into local currency. Banks are no longer serving their core functions: making productive loans or allowing those with USD deposits to withdraw them. Clients cannot transfer money deposited prior to October 2019 overseas. 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, provide a legal framework for banks to limit withdrawals, and provide a level playing field to all Lebanese. At the behest of the Central Bank in April 2020, banks began providing LBP at rates higher than the official pegged rate to customers with dollar-denominated accounts but at less than 60 percent of the market value of USD banknotes. In December 2021, the Central Bank announced new measures to stabilize the local currency, including allowing banks to provide USD to clients sourced from the Central Bank’s foreign currency reserves. Banks are acting as de facto foreign exchange houses, providing clients with scarce USD in exchange for LBP at rates slightly below the actual market rate. This intervention has stemmed the local currency’s fall, but most analysts believe it is only a temporary solution.
Lebanon relied on dollar inflows from abroad to finance imports and public spending and to maintain the LBP-to-USD peg, in place since 1997. Those dollars were deposited in Lebanese banks, which in turn deposited those dollars at the Central Bank or used them to buy Lebanese debt instruments. Nearly 70 percent of bank assets are tied to the sovereign in those two forms. In 2019, 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, planting the seeds of the current crisis.
Lebanon’s default on its USD-denominated debt in March 2020 – Lebanese banks at the time held $12.7 billion in Lebanon’s dollar bonds – further eroded Lebanese banks’ balance sheets. Financial experts estimated that 40 percent of loans from Lebanese banks were non-performing in December 2020. Bankers reported that correspondent banks overseas have stopped providing them with lines of credits – or only provide facilities with onerous conditions because of increasing country risk – further hampering bank efficacy in Lebanon. Correspondent banks also place high levels of due diligence on local banks because of the incomplete implementation of anti-money laundering/countering the financing of terrorism (AML/CFT) standards. The government’s April 2022 staff-level agreement with the IMF requires an upfront recognition of financial sector losses, which will likely entail the combination of a conversion of dollar-denominated deposits into local currency and 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. It is unclear whether the government has the political will to implement such a reform, however. The Lebanese banking sector covers the entire country with hundreds of operating commercial and investment bank branches. However, many branches have closed as banks are cutting costs to cope with the current crisis. The total domestic assets of Lebanon’s 15 largest commercial banks reached approximately $150 billion as of the end of 2021 (about 85percent 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 for domestic use only.
There are no legal restrictions in Lebanon on a foreigner or non-resident’s ability to open a bank account in local or foreign currency, provided they abide by Lebanese compliance rules and regulations. Currently, however, most banks are not taking on new clients or new accounts. 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 are compliant with the Foreign Account Tax Compliance Act (FATCA). Lebanon adopted the OECD Common Reporting Standards since January 1, 2018.
Foreign Exchange Controls
Commercial banks in late 2019 introduced informal capital controls on Lebanese depositors to stem the outflow of foreign currency; these controls have persisted today, and banks have barred virtually all overseas transfers. Clients with Lebanese pound (LBP)-denominated accounts can only convert their pounds to dollars outside of banks at licensed and unlicensed money exchangers.
The conversion of foreign currencies or precious metals is unfettered. Lebanon’s Central Bank posts a daily local currency-exchange rate on its website: https://www.bdl.gov.lb/. Lebanon has one of the most heavily dollarized economies in the world, and businesses commonly accept payment (and return change) in a combination of LBP and U.S. dollars, but given the scarcity of U.S. dollars, some businesses offered discounts or better prices for cash dollar payments.
U.S. Banks and Local Correspondent Banks: Below is a list of U.S. banks operating in Lebanon:
CITIBANK N.A.
Berytus Park, Bloc A, 3rd floor
Park Avenue, Beirut Central District
P.O. Box 11-1535
Beirut, Lebanon
Tel: 961-1-962464
Fax: 961-1-962444
BANK of NEW YORK MELLON (The) (Representative Office)
Atrium Bldg, 3rd floor
Corner Maarad-Weygand Street
Beirut, Lebanon
Tel: 961-1-988788
Fax: 961-1-989001
JPMORGAN CHASE BANK NA (Representative Office)
Gefinor Center, Bloc B, 16th floor, Suite No.1601
Clemenceau Street,
P.O. Box 11-5133
Beirut, Lebanon
Tel: 961-1-739583
Fax: 961-1-739581
Below is a list of the largest banks (ranked by assets as of December 2020) that have correspondent U.S. banking relationships:
BANK AUDI S.A.L.
Bank Audi Plaza, Bab Idriss
P.O. Box 11-2560
Beirut, Lebanon
Tel: 961-1-994000
Fax: 961-1-990555
BLOM BANK S.A.L.
BLOM Bank Bldg.
Rashid Karameh Ave., Verdun
P.O. Box: 11-1912 Riad ElSolh,
Beirut 1107-2807, Lebanon
Tel: 961-1-738938
BYBLOS BANK S.A.L.
Byblos Bank Headquarters,
Elias Sarkis Avenue, Ashrafieh
P.O. Box: 11-5605 Riad ElSolh,
Beirut 1107-2811, Lebanon
Tel: 961-1-335200
Fax: 961-1-334554
FRANSABANK S.A.L.
Fransabank Center,
Hamra Street
P.O. Box: 11-0393 Riad ElSolh,
Beirut 1107-2803, Lebanon
Tel: 961-1-340180
Fax: 961-1-354572
SOCIETE GENERALE DE BANQUE AU LIBAN S.A.L. (SGBL)
Sehnaoui Bldg,
Riad ElSolh Street, Beirut Central District
P.O. Box: 11-2955
Beirut, Lebanon
Tel: 961-1-980783
Fax: 961-1-980785
BANKMED S.A.L.
BankMed Center
482 Clemenceau Street
P.O. Box: 11-0348 Riad ElSolh,
Beirut 1107-2030, Lebanon
Tel: 961-1-373937
Fax: 961-1-362706
BANK OF BEIRUT S.A.L.
Bank of Beirut Bldg
Foch Street, Beirut Central District,
P.O. Box: 11-7354
Beirut, Lebanon
Tel: 961-1-958000
BANQUE LIBANO-FRANCAISE S.A.L.
Beirut Liberty Plaza
Rome Street, Hamra
P.O.Box 11-0808
Beirut, Lebanon
Tel: 961-1-791332
Fax: 961-1-440183
CREDIT LIBANAIS S.A.L.
Credit Libanais Tower
Corniche El Nahr, Adlieh Roundabout
P.O.Box: 16-6729
Beirut, Lebanon
Tel: 961-1-608000
Fax: 961-1-608126
BBAC S.A.L.
BBAC Bldg., 250 Clemenceau Street
P.O.Box 11-1536 Riad ElSolh,
Beirut 1107 2080, Lebanon
Tel: 961-1-366630
Fax: 961-1-365200
IBL BANK S.A.L.
Al Ittihadiah Bldg
Charles Malek Avenue, Rmeil
P.O.Box 11-5292 Riad ElSolh,
Beirut 1107-2190, Lebanon
Tel: 961-1-200350
Fax: 961-1-204505
LEBANON AND GULF BANK S.A.L.
Lebanon and Gulf Bank Bldg,
Allenby Street, Beirut Central District
P.O. Box 11-3600
Beirut, Lebanon
Tel: 961-1-965000
Fax: 961-1-965699
FIRST NATIONAL BANK S.A.L.
Allenby Street, Marfaa 147 Bldg,
Beirut Central District
P.O.Box 11-435 Beirut, Lebanon
Tel: 961-1-963000
Fax: 961-1-973090
CREDITBANK S.A.L.
Freeway Center,
Sin El Fil Blvd.
P.O.Box: 16-5795
Beirut, Lebanon
Tel: 961-1-501600
Fax: 961-1-485245
SARADAR BANK S.A.L.
Saradar Building,
Charles Malek Avenue, Achrafieh
P.O.Box: 16-5766
Beirut, Lebanon
Tel: 961-1-200770