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ABL Vice-Chairman: Full Compliance with Sanctions Protects Banks

ABL Vice-Chairman: Full Compliance with Sanctions Protects Banks

Friday, 2 November, 2018 - 08:45
Deputy Chairman of the Association of Banks in Lebanon (ABL), Saad Azhari. (Asharq Al-Awsat)
Beirut - Ali Zeineddine
With the beginning of the toughest and most comprehensive phase of the gradual US sanctions against Iran, and days after US President Donald Trump signed a new bill on financial sanctions against Hezbollah, concerns in Lebanon have mounted and questions have been raised over the financial sector’s ability to deal with the emerging pressure.

Lebanese banks face a range of challenges in the local market, in addition to ambulatory problems such as devaluations in some of their regional markets. This has left its mark on the growth of key indicators and the onset of deflation in individual and private sector financing, in parallel with an explicit reluctance to finance the country’s financial needs.

Asharq Al-Awsat presented these concerns to the deputy chairman of the Association of Banks in Lebanon (ABL), Saad Azhari, who is the president and general manager of BLOM Group, Lebanon’s second-largest banking group in terms of total assets.

“The Lebanese banking sector, along with Banque du Liban, deal with the issue of sanctions and abide by the laws and international standards with much seriousness and responsibility. For this reason, the banks have taken vigorous measures since 2011 to fully comply with international sanctions and laws in order to protect their reputation, maintain their cleanliness and access to international financial markets,” Ahzari said.

He continued: “In fact, the international and US authorities have appreciated the efforts of Lebanese banks and made them a model of commitment in the region. This applies to the new US law against Hezbollah. Procedures and mechanisms followed by Lebanese banks will allow compliance with the new law without any difficulties.”

As for the economic and financial difficulties that are putting pressure on the monetary stability strategy, Azhari emphasized the difficult economic conditions and fiscal situation, but added that thanks to BDL’s sound policies and the strength of the banking sector, monetary conditions and the policy of stabilization of the exchange rate were stable in the near to medium term.

This is based, according to ABL vice-chairman, on the BDL’s external assets, which exceed $43 billion, in addition to gold, covering 82 percent of the Lebanese pound, and more than 20 months of commodity imports, which can meet the needs of the foreign exchange market while keeping the exchange rate stable.

Asked about the means that would allow banks to continue financing the state’s financial needs, with the budget deficit and public debt rising to alarming levels, he said: “The fiscal situation is unsustainable. The budget deficit represents more than 10 percent of the GDP and the public debt is about 150 percent of GDP. This, of course, requires necessary structural reforms in public finances.”

With regards to public debt financing, Azhari said it now accounts for about 42 percent of the total public debt, which amounts to around $83 billion, representing only 15 percent of the total assets of Lebanese banks. This means that banks can finance more public debt because of their abundant resources.

“It should be noted that the Lebanese government has not been late in paying its debt obligations and has a white record in this area. Despite this, banks and even BDL cannot finance budget deficits indefinitely due to considerations related to monetary stability, liquidity and credit rating. Therefore, we expect the next government, which we hope will be formed soon, to make the reform of public finances one of its top priorities within the economic plan that is intended to implement to modernize and revitalize the Lebanese economy,” he stated.

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