The daily Star

25 Mar 2016

BEIRUT: Central Bank Governor Riad Salameh has asked the International Monetary Fund evaluate the Lebanese banking sector. “We have asked the IMF and monitoring and regulatory agencies to evaluate the Lebanese banking sector. We will publish these evaluations once they are completed,” Salameh told participants of forum called “In the Service of the Economy.”  International ratings agencies such as Moody’s, Standard & Poor’s and Fitch usually focus on the Lebanese banks’ exposure to the public debt and this exposure prompts these agencies to downgrade the outlook of these lenders although they have high profits and huge assets.

Salameh did not explain the reason behind this request but stressed the importance of transparency in the banking sector. Lebanese banks have been trying to diversify their sources of income in a bid to reduce their dependence on the domestic market. One of the methods to reduce this dependence was to expand in the Middle East and Africa.

But despite these efforts, Lebanese banks hold a big chunk of sovereign eurobonds and Treasury bills which put these lenders in a vulnerable position when ratings agencies assess their performance. Salameh said that Lebanon needs to meet some conditions to encourage ratings agencies to revise their outlook of the country.

“The ratings agencies have maintained their assessment of Lebanon. Any positive modification of this appraisal is linked to reactivating our constitutional institutions and implementation of reforms in public finances,” the governor explained. He added that the Central Bank has issued a circular to banks asking for more transparency.

Salameh also commented on the performance of the Lebanese economy. “The Central Bank expected a difficult year for the Lebanese economy in 2016 and we project zero percent GDP growth,” he said.

Salameh stressed that the Central Bank has made a series of initiatives to stimulate the Lebanese economy.

“We have issued circulars which preemptively organize personal loans. We are today in a stable condition in this sector,” he said. The governor explained that the cost of debt for a Lebanese family is equivalent of 44 percent of its income. Salameh said that thanks to these incentives and circulars, economic activity in November and December 2015 improved.

“We have also launched a package of incentives exceeding $1 billion to meet requirements for housing loans and loans for small- and medium-sized businesses.” He added that total bank investments in the knowledge economy have reached $243 million.

Salameh reminded that Lebanon has made great progress in the fight against money laundering and terrorism financing, and for this reason the Financial Action Task Force removed the country’s name from the list of non-cooperative states. He added that the balance of payment deficit in January 2016 reached $360 million