Banking Sector Reform Tracker[1]
Reform
Area: Banking Sector Restructuring & Transparency
Last Updated: August 2025
Citizen Impact Summary
Dimension |
Snapshot |
Source |
Who
Is Affected? |
Every depositor and
account holder in Lebanon; real GDP has already contracted 37 %
between 2018‑2022, wiping‑out 15 years of growth and pushing large parts of
the middle‑class into poverty. Haircuts on FX
deposits estimated at 60–80%, with 2.5 million accounts under $200K losing
~$15B. |
World Bank Lebanon Economic Monitor, Spring
2023; World Bank Lebanon - Systematic country
diagnostic, Summer 2024 |
Financial
Burden? |
Headline inflation
averaged 171 % in 2022 (150 % in 2021; 218 % in H1‑2022) and forced‑deposit
“lirafication” is imposing 60‑80 % hair‑cuts on savers. Banking sector is
effectively insolvent, with estimated losses over US$70 billion. 75% of
assets are with BdL and 3% with government securities; 70% of loans are
non-performing. Cash now constitutes
46% of GDP. This shift undermines anti-money laundering frameworks and
deepens informality. |
World Bank Lebanon Economic Monitor, Spring
2023; World Bank Lebanon - Systematic country
diagnostic, Summer 2024 |
Public
Services? |
A 7‑fold drop
in real primary spending since 2018 has led to an “acute collapse of
public‑service delivery”, including electricity, water, education and health. |
|
MentalHealth Toll? |
Living‑standards
keep eroding, poverty is spiralling and a “precarious environment” prevails,
fuelling anxiety, emigration and social fragmentation. |
World Bank Lebanon - Systematic country
diagnostic, Summer 2024 |
Overview & Objectives
Goal |
Restore solvency,
liquidity, and trust in the banking sector. Rebuild financial intermediation. |
Strategic
Importance |
Rebuilding financial
intermediation capacity is critical to economic recovery. Without
restructuring, credit will continue contracting, informal cash use will grow,
and anti-money laundering risks will deepen. |
Key
Reform Priorities |
1️. Adopt
a comprehensive bank restructuring strategy to recognize and allocate losses
transparently and equitably. 2️. Conduct
externally assisted bank-by-bank evaluations to identify losses and inform
resolution paths (mergers, acquisitions, liquidation). 3. Recapitalize
viable banks based on independent AQRs and rigorous valuation methods; Exit
non-viable banks. 4. Rehabilitate
the financial safety net including prudential regulation, resolution,
lender-of-last-resort, and deposit insurance. 5. Reform Banque
du Liban and the BCC to regain monetary authority and improve supervision. 6. Introduce
formal capital controls and a unified exchange rate. 7. Operationalize data-sharing between SIC and
PPA in line with Law No. 1/2025. 8. Publish
a transparent loss-allocation and recapitalization strategy, including asset
recovery. 9. Implement
reforms to avoid FATF grey-listing in the 2026 review. 10. Amend
the bank secrecy law to meet international transparency standards. |
Reform Actions & Status
Specific Reform Actions & Accountability
Reform Action Required |
Current Status |
Lead Authority |
Implementing Body |
Oversight / Supporting Actors |
Primary Source |
Bank
Restructuring Law |
Adopted July 31,
2025. Execution suspended until Financial Gap/Deposit Recovery Law passes.
Establishes 2‑chamber Higher Banking Authority; depositors gain special
status in liquidation committees. |
Parliament / CoM |
MoF, BdL, BCC |
IMF, WB, EU |
Parliament
session 31 Jul 2025; LBCI;
Asharq
Al‑Awsat 31 Jul 2025 |
Bank-by-bank
assessments - AQRs (Asset Quality Reviews) |
Pending; ToR not
signed; IMF recommends using SDRs to fund international auditors. |
CoM, BdL |
BdL, BCC |
IMF, WB |
World Bank Lebanon - Systematic country
diagnostic, Summer 2024; CoM, 8 Apr 2025; IMF
Comments on Bank Resolution Draft, May–June 2025 |
Recapitalization
of Viable Banks |
Stalled. Based
on independent Asset Quality Reviews (AQRs) and rigorous valuation methods. Non-viable banks to exit. Awaiting results
of AQRs and clarity on loss-allocation. No recapitalization mechanisms
implemented yet. |
BdL, MoF |
Banks |
IMF, WB |
AlJoumhouria, May 2025; IMF
Comments on Bank Resolution Draft, May–June 2025 |
Resolution
of Non-Viable Banks |
Enabled by new law
but frozen until Financial Gap Law; process to include depositor
participation and loss hierarchy enforcement. |
CoM, Parliament |
BdL, MoF |
IMF |
World Bank Lebanon - Systematic country
diagnostic, Summer 2024; LBCI
28 Jul 2025 |
Amend
Bank Secrecy Law (to meet FATF/IMF criteria) |
Partial reform
enacted, further amendments pending. Law No. 1/2025 grants Special
Investigation Commission (SIC) full access, but implementation lags due to
lack of a BdL circular regulating procedures. Still allows discretionary
opacity; obstructs SIC and AQR data access. The practical ability of
institutions to act without political interference; The lack of automatic
enforcement without further decrees; Concerns about appeal mechanisms that
may delay or dilute effectiveness. |
Parliament |
MoF, BdL |
FATF, IMF, EU |
World Bank Lebanon - Systematic country
diagnostic, Summer 2024 |
Formal Capital Controls & Unified Exchange Rate |
Not in place; informal restrictions continue. Draft in
Parliament; not IMF-compliant. The
draft includes retroactive clauses and suspends judicial rulings, breaching
IMF Art. VIII compliance. Formal capital controls to defend reserves.
Unified, market-driven exchange rate. |
Parliament |
BdL, MoF |
IMF, ABL |
|
Loss
Recognition & Allocation Plan |
Stalled; no
agreement between key actors, and due to unresolved debate between MoF and
PMO over burden-sharing between state and depositors. Recognize and allocate
financial losses transparently and equitably. |
MoF / BdL |
BdL |
IMF |
World Bank Lebanon - Systematic country
diagnostic, Summer 2024; |
Judicial
Accountability for Financial Crimes |
Limited enforcement; political obstruction persists. BDL announced internal anti-corruption purge
in April–May 2025. Cooperating with European law firms to pursue embezzlement
and illicit enrichment cases involving former and current officials. |
Judiciary |
MoJ, Courts |
EU, WB, CSOs |
World Bank Lebanon - Systematic country
diagnostic, Summer 2024; L'Orient
Today, 22 May 2025 |
Rehabilitation
of Financial Safety Net |
Reform prudential regulation, resolution,
lender-of-last-resort, and deposit insurance. Weak regulation, no functioning deposit insurance mechanism. |
BdL |
BdL, BCC |
IMF, WB |
World Bank Lebanon - Systematic country
diagnostic, Summer 2024 |
Reform of Banque du Liban (BdL) and Banking Control
Commission (BCC) |
BdL to regain
monetary authority and safety net functions. Stronger banking supervision and
licensing. |
Parliament |
BdL, BCC |
IMF |
World Bank Lebanon - Systematic country
diagnostic, Summer 2024 |
Reform Roadmap Timeline &
Critical Path
Recent Milestone
Recent Milestone |
Date |
What Happened |
Status on Critical Path |
Source |
Banking
Reform Law Adopted |
31 Jul 2025 |
Parliament passed
law on bank restructuring and depositor prioritization. |
Completed –
execution pending |
|
Committee
Approval (Finance & Budget) |
28 Jul 2025 |
Finance Committee
approved final amended draft after 6‑hour session; linked law to deposit
recovery bill. |
Completed |
|
IMF
Comments on Draft Bank Resolution Law |
12 May 2025 |
IMF issued detailed
technical comments on the draft law, citing concerns over depositor
protections, weak resolution safeguards, and legal ambiguity. |
Feedback under
review by Parliament |
|
Subcommittee
begins hearings on competing restructuring law draft |
6 Jun 2025 |
Finance & Budget
Subcommittee opened discussions on competing ideas: one favors an independent
authority; the other, BDL control over restructuring. |
Ongoing debate –
risks delay |
|
Bank
Secrecy Final Amendment (Law 1/2025) |
24 Apr 2025 |
Adopted by
Parliament on 24 April 2025 and published in the Official Gazette on 25 April
2025. Expands authority to lift secrecy for oversight, auditing, and
restructuring purposes. BdL, BCC, and the National Deposit Guarantee
Institute can now request full access to banking records for restructuring
and auditing without needing to specify individual accounts. Requests may be
challenged before an urgent matters judge. Requires a decree from the Council
of Ministers upon recommendation by the finance minister, following BdL
input. |
Completed – prerequisite for IMF PriorAction #2 |
Official Gazette No. 17, 25 Apr 2025 |
CoM Approval of Bank Reform Draft |
12 Apr 2025 |
Full law finalized
by CoM; to be transmitted to Parliament. |
Urgent – referenced as “over‑due” |
|
IMF
Art. IV – Staff concluding statement |
23 Mar 2025 |
Re‑affirms need for restructuring & capital controls |
Urgent – referenced as “over‑due” |
|
PPA
internal & financial regulations adopted |
18 Dec 2024 |
Enables transparent disposal of bank assets/contracts |
Completed |
Decree No. 27 dated
28 January 2025 – Financial Regulations of the Public Procurement Authority;
Decree No. 28
dated 28 January 2025 – Internal Regulations of the Public Procurement
Authority |
Next Steps – Transparency and
Accountability Calendar
Action |
Responsible Entity |
Target Date |
Source |
Submit Financial Gap & Deposit Recovery Law |
MoF / PMO |
Q3 2025 |
|
Constitute Higher Banking Authority (2‑chamber) |
BdL / MoF /
Judiciary |
Q3 2025 |
|
Sign decree approving AQR ToR; start fieldwork |
BdL Governor &
Finance Minister |
N/A |
N/A |
First SIC public report on bank data disclosure
requests |
SIC |
N/A |
N/A |
MoF publishes loss allocation simulation (baseline) |
MoF |
N/A |
N/A |
Parliament Finance/Justice joint session on Capital Control
law |
Speaker of Parliament |
N/A |
N/A |
Implementation Bottlenecks & Required Actions
Bottleneck |
Official Explanation |
Required Immediate Action |
Source |
IMF identifies flaws in final restructuring law |
Draft law deviates
from international standards, including weak depositor protections and
unclear RA independence |
Revise law based on
IMF’s 9-point critique |
|
Competing Proposals for Restructuring Authority |
CoM draft removes
ABL and empowers new body; BdL draft centralizes authority in BDL |
Parliament must
reconcile competing ideas; CSOs should demand independent oversight |
|
Financial Gap Law not submitted |
MoF hesitant to
define loss-sharing terms |
Urgently draft and
submit law to define loss distribution |
|
Cabinet deadlock over
loss sharing formula |
MoF & PMO
disagree on treating large depositors vs. state asset fund. |
Convene tripartite
MoF PMO IMF mediation workshop. |
- |
AQR
budget unfunded |
BdL cites FX
shortage; MoF hesitant to authorize use of SDRs. |
Sign ToRs and
approve use of IMF SDR allocations for international AQR auditors. |
- |
Capital Control law constitutional
concerns |
Some MPs oppose retro‑active clauses. |
Amend draft to include sunset clause + judicial review
article. |
- |
Legal
Fragmentation |
Conflicting laws (e.g., capital control vs. judicial
rulings) risk legal chaos. |
Amend legal text to include judicial oversight and sunset
clauses. |
- |
Elite
Resistance |
Powerful
stakeholders resist equitable loss distribution |
highlight regressive effects of delay. |
- |
Stakeholders & Roles
Entity |
Core Function |
Contact |
Council
of Ministers |
Reform adoption & law submission |
Presidency of CoM |
Banque du Liban (BdL) |
Bank supervision, macro-oversight |
BdL Governor’s
Office |
Banking
Control Commission |
Regulatory oversight & assessment implementation |
BCC |
Parliament |
Legislative approval of laws |
Finance & Admin Committee |
IMF
/ World Bank |
Technical assistance
and monitoring |
IMF Resident Office |
Association
of Banks (ABL) |
Sector representation & negotiation |
ABL |
CSOs
/ Depositor Groups |
Advocacy, accountability |
Legal Agenda, Depositors Union |
Legal & Policy Framework
Instrument |
Status |
Key Provisions |
Implementation Note |
Bank
Secrecy Law (1956) as amended by 306/2022 & 1/2025 |
In force |
Full look through
for SIC, tax & judicial bodies; no BdL veto. |
BdL circular on
procedures pending. |
Monetary
& Credit Law – Art 150 (amended 2022 & 2025) |
In force |
BdL must report FX reserve
position quarterly to Parliament’s Budget Committee. |
- |
Draft Bank Restructuring Law |
Cabinet draft (May 2025) |
Loss hierarchy;
bridge bank tool; depositor bail in limits. |
Needs Cabinet
approval then FastTrack to Parliament. |
Capital Control Bill (9014/2023 & MP draft) |
Committee stage |
Temporary FX
controls; withdrawal ceilings; dispute resolution panel. |
Must align with IMF Art VIII by‑laws. |
Official Sources and Reference Materials
Document |
Where to access |
Statement
of Ministerial Policy (Feb 2025) |
|
World
Bank Lebanon - Systematic Country Diagnostic, Summer 2024 |
World Bank Lebanon - Systematic country
diagnostic, Summer 2024 |
World
Bank Lebanon Economic Monitor, Fall 2022 |
|
IMF
2023 Staff Concluding Statement |
|
Law No. 1/2025
(BankSecrecy amendment) |
- |
IMF
Staff Concludes Visit to Lebanon |
List of Acronyms – Banking Sector
Reform Tracker
Acronym |
Full Name |
ABL |
Association of Banks in Lebanon |
AQR |
Asset Quality Review |
BdL |
Banque du Liban (Central Bank of Lebanon) |
BCC |
Banking Control Commission |
CoM |
Council of Ministers |
CSOs |
Civil Society Organizations |
EU |
European Union |
FX |
Foreign Exchange |
IMF |
International Monetary Fund |
MoF |
Ministry of Finance |
MP |
Member of Parliament |
PPA |
Public Procurement Authority |
PMO |
Prime Minister’s Office |
SDR |
Special Drawing Rights (IMF reserve asset) |
SIC |
Special Investigation Commission (Anti-Money Laundering
Unit) |
ToR |
Terms of Reference |
WB |
World Bank |
[1] All reform data presented
here is based on official Lebanese government sources, such as laws, decrees,
strategies, and verified public data. Where possible, each update is linked to
a document, gazette entry, or institutional publication.