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Lebanon CB seeks formal banking controls

The local currency has lost over half its value against the dollar on the black market.

Agence France-Presse

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Beirut (AFP) — Lebanon’s central bank chief said Sunday he has requested special prerogatives to legitimize and regulate controversial controls imposed by banks on transactions in the crisis-hit country.

If granted such powers, Riad Salameh would be able to provide official cover to banks who have been restricting dollar transactions since September without state authorization.

Salameh said his request was submitted in a memo to Lebanon’s prime minister and the finance ministry aimed at “harmonizing relations between clients and their banks.”

“The intervention of the Central Bank with the approval of the state will provide legal cover for the measures,” he wrote in an email to AFP.

The document requests authorities take legal measures to grant the central bank “exceptional powers” to impose “temporary measures” restricting cash withdrawals, transfers abroad and other banking transactions.

Such a move, according to the memo, would help “regulate these measures and standardize them between banks so that they are implemented in a fair and equal way.”

The finance ministry has yet to respond publicly.

Banks have since September arbitrarily capped the amount of dollars customers can withdraw or transfer abroad, sparking fury among clients who accuse them of holding money hostage.

Although no formal policy is in place, most lenders have arbitrarily capped withdrawals at around $1,000 (900 euros) per month, while others have imposed tighter restrictions.

“The main objective of the letter sent to the ministry of finance is to make the controls official,” said one banking source.

Banks’ restrictions have fueled panic in a protest-hit country suffering its worst economic crisis since the 1975-1990 civil war.

Sparked by a grinding liquidity crunch, the informal controls are increasingly forcing depositors to deal in the plummeting Lebanese pound.

The local currency has lost over half its value against the dollar on the black market.

The official rate was pegged at 1,507 Lebanese pounds to the greenback in 1997.

In an attempt to rescue their money, some customers have filed lawsuits against banks for trapping their savings.

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