Lebanon’s Bank Audi and al-Mawarid Bank stated on Wednesday they disagreed with a letter despatched on behalf of the nation’s banking affiliation that branded a staff-level settlement (SLA) with the International Monetary Fund “unlawful.”
The SLA pledges $3 billion in financing over 4 years to assist Lebanon get well from a monetary meltdown that has seen the foreign money lose greater than 90 % of its worth.
The two banks, in addition to bankers from two different members of the Association of Banks in Lebanon (ABL) who requested to talk anonymously because of the sensitivity of the matter, stated they weren’t conscious the letter was being despatched on ABL’s behalf.
Their objection to the letter’s contents reveals rising fissures within the affiliation, which counts greater than 50 banks as members.
In an announcement, the ABL stated it “does not fully oppose” the April settlement and views an IMF deal as one of many predominant methods to exit Lebanon’s disaster, however known as for additional consultations on how some $70 billion in monetary sector losses are handled.
A full settlement is conditional on Lebanon implementing a collection of measures, together with beginning to restructure its zombie banking sector.
In the letter to the IMF dated June 21, the DecisionBoundaries monetary advisory agency stated its consumer, the ABL, “holds very serious reservations on the recent SLA,” elements of which it stated had been “likely to further harm Lebanon’s economy, probably in an irreparable manner.”
It stated implementing the SLA can be “unlawful.”
An ABL spokesperson confirmed the letter had been despatched on behalf of the affiliation however didn’t instantly reply to questions on how the choice to ship it was taken.
Carlos Abadi, managing director at New York-based DecisionBoundaries and the adviser who signed the June 21 letter, had no remark.
Audi, Lebanon’s high financial institution, was “not made aware or approved the contents of the letter addressed to the IMF from a consultant of the ABL dated June 21, 2022,” it stated in an announcement to Reuters.
“In fact, they acknowledge that the only way out of Lebanon’s acute crisis is an IMF program, which should be enacted imminently to avoid further irreversible value destruction,” the financial institution assertion stated.
It famous the financial institution “has important reservations to ensure the plan is actionable, fair and sustainable. The proposed amendments, which still respect the IMF principles, are being channeled to the concerned parties.”
‘Behind closed doors’
Al-Mawarid Bank was “not aware” of the letter and had not been invited to any conferences to debate it, chairman Marwan Kheireddine advised Reuters.
“It’s ridiculous that this happens behind closed doors,” Kheireddine stated, including that the letter made it sound like banks had been “in denial” about having to “be part of the solution and accept to bear certain losses.”
“The letter was done without consultation from any other ABL member. It’s a bloody scandal,” one of many bankers stated.
“We are quite upset about it,” one other stated.
The SLA and Lebanon’s May 20 monetary restoration plan had known as for limiting recourse to public sources to resolve monetary sector losses.
The ABL letter as an alternative known as for the Lebanese state to plug the hole by utilizing state belongings, turning tens of billions in hard-currency deposits into Lebanese kilos and in addition utilizing Lebanon’s roughly $15 billion in gold reserves.
“I hear voices – including some within ABL – suggesting using our gold to pay depositors… Don’t touch the gold, whether to sell it, to pledge it, or to financial engineer it. Don’t. Touch. The. Gold,” Bankmed CEO Michel Accad stated in a tweet on Wednesday.