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BDL’s Circular 158 fails to appease depositors

People wait outside a bank branch in the centre of the Lebanese capital Beirut on November 19, 2019. AFP/Joseph Eid LEBANON-POLITICS-DEMO

BEIRUT: The Central Bank’s Circular 158, which allows depositors with foreign currency accounts from before Oct. 17, 2019, to withdraw up to $400 in cash in US currency banknotes and the equivalent of $400 in Lebanese poundss based on BDL’s platform has so far failed to induce most people to take the offer, bankers and experts said.

Circular 158 was supposed to take effect as of July 1, 2021, but most depositors seem reluctant to accept BDL’s offer, citing a number of ambiguities in this circular that needs to be clarified.

The depositors, or most of them, claimed that the banks were not very transparent or forthcoming with their customers, noting that the lenders ask their clients to sign a contract stating that any person who wants to withdraw $400 in cash must freeze his bank account for five years and to lift the banking secrecy on every transaction.

Furthermore, the depositors insisted on more clarification from the banks about the fate of their accounts if the clients declined to use Circular 158.

Not all banks have started implementing the new circular as of July 1, arguing that they needed a few more days to implement this decision, but stressing that the lenders hadve no problem in allowing their customers who meet the conditions to withdraw their money from any branch.

Some of the banks started executing Circular 158, but most have admitted that the majority of the clients who meet the conditions wanted to more information about the new decision.

“Our branches had 1,500 inquiries in the first day but very few people accepted this to sign the terms of the contract. But it is only natural that the customers inquire about Circular 158. The money for this circular is available but we want the customer to sign the contract so he/she can collect the money,” a general manager of a bank told The Daily Star.

He dismissed claims that the depositors may lose his money if they refused to sign the contract with the lenders, stressing that the money was there and would not go away.

Banks did not expect the customers to withdraw the money in big number in the first two weeks because most of them prefer to consult their friends and lawyers on whether to sign the contract with the lenders.

“The banking secrecy will only be lifted on every transaction by the customer. This is intended to ensure that the customer is getting his money and won’t claim in the future that the lender refused to release his money,” one banker explained.

He added that BDL had added this clause to make sure the customer did actually benefit from the circular.

“BDL wanted to ensure that the cash for the first year was available and may review the conditions of the withdrawal in the second year,” the banker said.

Bankers in general seemed confident that the cash allocated for the implementation of Circular 158 would be available after BDL instructed all the lenders to raise their capitals by 20 percent and to secure 3 percent foreign currency liquidity from their correspondent banks abroad.

The total amount of the money that will be disbursed in the first year is estimated at $2 billion to $3 billion.

The Central Bank said it would assist any bank that was not able to meet the conditions of Circular 158.

Some banks claim that they have secured the cash for the circular for at least the first two to three years.

“If a customer did not benefit from circular 158, he can still withdraw his money at the rate of LL3,900 against the dollar (better known as Lollar). The customers should not worry about their money because the cash is there,” one banker said.

But some banks acknowledge that the number of lenders will not remain the same under these critical economic conditions in Lebanon.

“Banks will eventually be forced to merge even if a new government is formed and reforms are implemented. There is no escape from bank consolidation in the future,” a banker said.

But the depositor’s associations and groups that were formed after the crisis warn that Circular 158 is nothing more than a trap for the customers who lost most of their savings at the stroke of a pen.

Firas Nabil Tannous, who is spearheading a campaign to retrieve the deposits of the Lebanese, advised the rest of the depositors not to sign the contract with the banks.

“Let me be clear. We want all our money back. How can BDL offer to give the customer $400 based on the rate of LL12,000 while the actual rate is over LL17,500? This is a ripoff, Tannous told The Daily Star.

He added that most banks are not even complying fully with BDL’s circulars and only implement what suits them the most.

“Central Bank gGovernor Riad Salameh has poked a lot of loopholes in Circular 158 to make it more complicated for citizens to withdraw their money,” Tannous said.

Tannous and other associations have agreed to sign a big petition to the United Nations to force BDL and the commercial banks to release all of the depositors' funds.

“We also found out that many people who should benefit from Circular 158 were denied this privilege under bizarre excuses from the banks. Banks are being selective in the implementation of the circular and this is another proof the lenders are not sincere in allowing people in taking their money," he explained.

Tannous blasted BDL and most of the banks, claiming that all these circulars are intended to force most depositors to accept their offers or lose all their savings if they refused to sign the contract.

“We will take our case to the UN if the banks decline to give us our money or at least give us a deadline in paying us all of our deposits at least gradually,” he added.

BDL indicated that resident and non-resident natural persons, including minors, can benefit from the circular, as long as the depositor had a bank account in foreign currencies as of Oct. 31, 2019, and still had an account in foreign currencies as of the effective implementation date of the circular.

It stated that non-eligible entities consist of commercial companies, sole proprietorships, non-government organizations, public sector entities, resident and non-resident banks and financial institutions, as well as individuals who did not meet the second clause of Circular 154 about repatriating a portion of the amounts that they transferred abroad since July 2017.

BDL also said that joint accounts among natural persons can qualify for the circular, and that the ceiling per account for benefiting from the circular is $50,000, while the account owners have to decide among each other how to share the cash withdrawals.

It added that, in case the persons have more than one joint account, they will have to choose which account to use to benefit from the circular. Further, it noted that, in case a natural person who has a joint account has also an individual account that qualifies for the circular, the latter can utilize his or her individual account for the withdrawals under the circular, while the other person can benefit from withdrawals from the joint account.

BDL noted that banks have to calculate the amount that each account holder can transfer to the new "Special Sub Account" that the client has to open in order to benefit from Circular 158.

It added that banks have to calculate the amount of the client's aggregate foreign currency deposit balance as at Oct. 31, 2019, net of existing cash collateral and cash margins, including contingent liabilities; as well as the client's deposits in foreign currencies as of March 31, 2021 net of existing cash collateral and cash margins, including contingent liabilities; net of the amounts that the depositor converted from Lebanese pounds to foreign currencies after the end of October 2019; and net of the amount in new accounts according to Circular 150 dated April 9, 2020.

Further, the bank has to select the smaller amount from the above two calculations, and subtract from it the aggregate balance of any retail and housing loans installments in foreign currencies that the depositor has paid in Lebanese pounds at the official exchange rate as per BDL Circular 568, in addition to the retail and housing loans installments in Lebanese pounds that are still due according to the same circular.

 

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