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BDL slaps $4.6M fines on banks over breaches

Buildings under construction in Beirut. (The Daily Star/Stringer)

BEIRUT: Lebanon’s Central Bank said Tuesday it has slapped LL6.9 billion ($4.6 million) of fines on some banks and clients for violating the rules and conditions of BDL’s subsidized housing loans.

“As a result of the continuous scrutiny by the Banking Control Commission and BDL since 2011 and until this date, we discovered that some customers and banks have not complied with the validity of the implementation of the provisions of circulars issued by Banque du Liban which govern the mechanism of benefiting from housing loans and the objectives granted for them. The number of violations reached 389 with total fines of LL6.9 billion of the housing loans benefiting from a reduction in the mandatory reserve. As for the housing loans benefiting from loans from the Banque du Liban, there were 48 violations and fines related to them amounting to about 746 million Lebanese pounds,” a statement by BDL said.

But BDL did not disclose the names and the number of Lebanese banks that have violated the conditions for granting subsidized housing loans to limited-income families.

BDL has launched the subsidized housing loan program in 2009 to help limited-income families buy affordable houses and at the same time to stimulate the real estate sector in the country.

According to reports, wealthy businessmen benefited from the subsidized housing loans although this program was especially designed for employees with lower incomes.

BDL said eight more suspected violations were under scrutiny by the financial authorities. “But the number of violators from the total number of beneficiaries from the subsidized housing loan program of BDL is hardly 3.5 per 1,000,” the statement added.

It stressed that BDL renews its commitment to continue auditing all subsidized housing loans and to ensure banks and clients abide by the conditions related to these loans.

It added that all violators will be fined by the financial authorities.

The statement summarized the subsidized housing loan program since 2009 and said that entitled customers can only benefit from it once and are not allowed to sell the property for seven years after its purchase.

Banks benefit from a reduction in the mandatory reserve deposited with BDL (which represents a certain percentage of their liabilities due to deposits and borrowed funds deposited with Banque du Liban) against the loans without the need for prior approval of the reduction for each loan as long as these loans are within the approved ceilings.

“However, it remains for each bank to ensure that the customer is committed to the purpose for which the housing loan was granted, ie to finance the purchase of a main residence for him and his family and for one time only,” the statement added.

It stressed that the total amount of housing loans granted by banks under the BDL subsidized program have reached LL19.14 trillion up to 31/5/2018 and the total loans have reached 131,000, with an average loan of LL146.1 million.

“At the beginning of the year 2018, all loans in LBP issued by the Banque du Liban at the disposal of banks for the financing of housing loans had been exhausted,” the statement explained.

In view of this development, BDL issued a new circular in 1/2/2018 and set a ceiling of LL750 billion for subsidized housing loan program for limited income families.

But most or all commercial banks have suspended the subsidized housing loan program due to the lack of cash from BDL.

However, the subsidized housing loan program is expected to be reactivated once the new government is formed and money is allocated for this plan.

The suspension of the housing loan program has dealt a blow to the struggling real estate sector and also affected a big number of applicants who were hoping to buy an affordable house at low interest rates. – The Daily Star

 
A version of this article appeared in the print edition of The Daily Star on September 05, 2018, on page 4.

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