Banque du Liban
Encyclopedia
Banque du Liban is the central bank
of Lebanon
. It was established on August 1, 1963 and became fully operational on April 1, 1964. It is currently headed by Riad Salameh
, who was named the Middle East's best central bank governor by Euromoney in 2005.
One of the main responsibilities of the bank is issuing Lebanon's currency, the Lebanese Pound
. Other responsibilities include maintaining monetary stability, regulation of money transfers, and maintaining the soundness of the banking sector. Banking is a very important part of Lebanon's economy with over 100 different banks, which makes the role of Banque du Liban particularly important. It currently owns 99.37% of the shares of Lebanon's national carrier, Middle East Airlines
. However, plans call for it to sell its stake in the airline by 2008 as part of government plans to privatize many institutions.
The government has recently launched an ambitious 5-year economic reform program in hopes to cut the country's debt. The outcome of the reform program will largely be dependent on Banque du Liban.
Besides the main branch in Beirut
, it has branches in Aley
, Baalbeck, Bikfaya
, Jounieh
, Nabatiye
, Sidon
, Tripoli
, Tyre, and Zahlé
.
domination of Lebanon, which lasted for more than four centuries, was brought to an end on October 6, 1918, with the entrance of the Levant
Marine Division in Beirut roads. The paper money issued by the Turkish
Treasury, with a forced exchange rate, suffered the same fate.
In order to normalize economic life in the occupied territories and cover the expenses of the allied forces, English authorities imposed the banknote
of the National Bank of Egypt
, the Egyptian currency having been, since October 30, 1916, closely linked to the sterling and entirely covered by securities issued in sterling.
In accordance with the convention signed between the French
and the British
governments on September 15, 1919, a new occupying authority started to rule Lebanon. French troops replaced the British, under the command of General Gouraud
, who was appointed on October 12, 1919 as "High-Commissioner of the French Republic in Syria
and Cilicia
, and Commander-in-Chief of the Levant Army". Consequently, the use of the Egyptian currency, suitable for the British Treasury, became inappropriate. To obtain Egyptian pounds, France
, being the sole occupying power, had to offer increasing amounts of francs.
During World War I
, the French franc had maintained its status thanks to advances from the British and American Treasuries. However, in 1919, the French franc registered a drop because of the British government's decision to stop these advances, thus breaking the alliance between the franc, the sterling and the dollar
, and also because of the United States
Government's decision to suspend its regulating role of the associated change rates. In order to replace the Egyptian pound, the French government decided, by Decree N° 129 issued by the High Commissioner on March 13, 1920, to endow Syria with a national currency.
On September 1, 1920, the representative of France proclaimed Great Lebanon. In 1920, the Bank of Syria was granted the concession of issuing the Syrian currency, which became legal tender on May 1, 1920. Banknotes issued by this bank were reimbursable to the bearer or at sight by checks drawn on Paris
, at the rate of FF 20 for one Syrian pound
.
As a consequence, an independent, currency-issuing department was established at the Bank of Syria. It was responsible for putting in circulation and withdrawing banknotes. Issuances were made either on behalf of the Treasury in Paris or on behalf of the Bank itself.
Concerning commercial operations, the Issuing Department was to provide the Bank of Syria with banknotes only in exchange of foreign currencies or foreign securities, which constituted, together with the credits granted by the Treasury in Paris, the coverage of the currency in circulation.
. Its capital is totally appropriated by the State.
The BDL is endowed by law, with the prerogatives to fulfill its mission. It can use all measures it deems appropriate to ensure exchange rate stability, specifically the intervention in the foreign exchange market
by buying and selling foreign currencies.
The BDL controls bank liquidity by adjusting discount rates, by intervening in the open market, as well as by determining credit facilities to banks and financial institutions. It regulates banks' credit in terms of volume and types of credit, by imposing credit ceiling, by directing credits towards specific purposes or sectors and setting the terms and regulations governing credits in general.
The BDL imposes on banks reserve requirements on assets and loans as determined by BDL, as well as penalties should shortfalls occur. Investment in TBs may be considered by the BDL as part of the reserve requirements.
The BDL grants licenses for the establishment of banks, financial institutions, brokerage firms, money dealers, foreign banks, leasing companies and mutual funds in Lebanon. The Banking Control Commission controls and supervises these institutions. Conferring with the Association of Banks, the BDL issues circulars and resolutions governing the relations of banks with their customers.
There is a regular coordination between the BDL and the Government in order to ensure consistency between BDL's objectives and those of the Government. Cooperation with the Government implies coordinating fiscal and monetary policy measures. It informs the Government on economic matters that might negatively affect the national economy and currency and suggests measures that might benefit the balance of payments, the price level, public finance and offers advice on how to promote economic growth. It also ensures the relations between the Government and international financial institutions.
program.
Confidence was boosted by the successful outcome of Paris-II conference, held in November 2002 with the participation of a number of countries and international organizations. An aggregate amount of USD 4.3 billion was pledged in 15-year loans at reduced rates to support the government's economic reform plan for lowering the servicing cost of public debt, which accumulated over the years due to costly reconstruction efforts.
These developments led to a significant drop in TBs' interest rates, followed by a cut in commercial banks' average deposit and lending rates in Lebanese pound (LBP) and in foreign currencies. In parallel, USD holdings were being converted on a wide scale into LBP holdings. Moreover, the BOP performance, which started to improve in May 2002, remained on the same trend, with cumulative surpluses exceeding USD 2 billion at end-April 2003, while BDL assets in foreign currencies stood at more than USD 10 billion, excluding gold.
In the last few months, a strong demand emerged on Lebanese government paper in local and foreign currencies, due to increased confidence, reinforced in April by the Government's ability to pay from the Treasury a maturing USD 500 million Eurobond
issue, without resorting to rollover as in the past. This was accompanied by a positive assessment by the IMF and major international rating agencies, which considered that Lebanon is on the right track in trying to end its economic and financial difficulties, and that its performance in coping with the aftermath of the war in Iraq
is the best in the region.
In the banking sector, equity capital continued to increase, reaching USD 3.5 billion at end-April, and pushing the average capital adequacy ratio to 18%. Despite their modest growth, private sector loans attained 100% of GDP, a unique performance in itself. Deposits grew at an annual 11% rate, reaching USD 47 billion at end-April - more than double the GDP - with a dollarization rate dropping to 68%, from a 74% peak in May 2002. This excellent performance was buttressed by the BDL's efforts to strengthen prudential supervision, paving the way for compliance with Basle-II requirements by a sound banking sector, ready to better manage operational risks, and to improve transparency and good governance.
The government's commitment to decelerate the growth of public debt and to reduce its servicing cost was reflected in the conservative budgets of 2002 and 2003. Coupled with measures to achieve the highest possible proceeds from privatization and securitization, this strategy will be pursued over the medium term, expectedly leading to a public finance recovery.
The Governor is the legal representative of the Banque du Liban, and has extensive authority on the management of the Bank. He is entrusted with the enforcement of the Code of Money and Credit, and the implementation of the Central Council's resolutions. Upon the proposal of the Minister of Finance, the Governor is appointed by decree sanctioned by the Council of Ministers, for a renewable six- year term.
After the consultation with the Governor and upon the proposal of the Minister of Finance, the Vice-Governors are appointed by decree sanctioned by the Council of Ministers for a renewable five-year term. They assist the Governor in managing the Bank, carrying out functions specified by the Governor. In addition, they assume their duties as members of the Central Council.
The Central Council sets the monetary and credit policies of the Bank, including money supply, and discount and lending rates. It discusses and decides, among other things, on issues concerning the banking and financial sectors, the establishment of clearing houses, the issuing of currency and on loan requests by the public sector entities.
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
of Lebanon
Lebanon
Lebanon , officially the Republic of LebanonRepublic of Lebanon is the most common term used by Lebanese government agencies. The term Lebanese Republic, a literal translation of the official Arabic and French names that is not used in today's world. Arabic is the most common language spoken among...
. It was established on August 1, 1963 and became fully operational on April 1, 1964. It is currently headed by Riad Salameh
Riad Salameh
Riad Salameh is the governor of the Central Bank of Lebanon. He was born on July 17, 1950 in Kfardebian, Lebanon, son of Toufic and Renee Salameh...
, who was named the Middle East's best central bank governor by Euromoney in 2005.
One of the main responsibilities of the bank is issuing Lebanon's currency, the Lebanese Pound
Lebanese pound
The Lebanese pound is the currency unit of Lebanon. It is divided into 100 piastres but inflation has eliminated the subdivisions....
. Other responsibilities include maintaining monetary stability, regulation of money transfers, and maintaining the soundness of the banking sector. Banking is a very important part of Lebanon's economy with over 100 different banks, which makes the role of Banque du Liban particularly important. It currently owns 99.37% of the shares of Lebanon's national carrier, Middle East Airlines
Middle East Airlines
Middle East Airlines – Air Liban S.A.L. , more commonly known as Middle East Airlines , is the national flag-carrier airline of Lebanon, with its head office in Beirut, near Beirut Rafic Hariri International Airport...
. However, plans call for it to sell its stake in the airline by 2008 as part of government plans to privatize many institutions.
The government has recently launched an ambitious 5-year economic reform program in hopes to cut the country's debt. The outcome of the reform program will largely be dependent on Banque du Liban.
Besides the main branch in Beirut
Beirut
Beirut is the capital and largest city of Lebanon, with a population ranging from 1 million to more than 2 million . Located on a peninsula at the midpoint of Lebanon's Mediterranean coastline, it serves as the country's largest and main seaport, and also forms the Beirut Metropolitan...
, it has branches in Aley
Aley
Aley is a picturesque town in Mount Lebanon. It is located 17 km uphill from Beirut, just south of the summer resort of Bhamdoun and north of the strategic town of Souk El Gharb.-Demographics:...
, Baalbeck, Bikfaya
Bikfaya
Bikfaya is a town in the Matn District region of Mount Lebanon. Its stone houses with red-tiled roofs resting amidst pine and oak forests make Bikfaya one of the most sought-after suburbs of Beirut and one of Lebanon's most popular summer resorts.-Culture:...
, Jounieh
Jounieh
Jounieh is a Mediterranean coastal city about 16 kilometers north of Beirut, Lebanon. Jounieh is known for its seaside resorts, pubs, restaurants and nightclubs, as well as its old stone souk, ferry, and cablecar , which takes passengers up the mountain to the shrine of Our Lady of Lebanon in...
, Nabatiye
Nabatiye
Nabatieh , or Nabatiye, is the principal town of the Nabatieh Governorate, in southern Lebanon. Nabatieh has approximately 120,000 inhabitants, is the capital of the Jabal Amel area and the chief center for both the mohafazat, or governorate, and the caza, or canton...
, Sidon
Sidon
Sidon or Saïda is the third-largest city in Lebanon. It is located in the South Governorate of Lebanon, on the Mediterranean coast, about 40 km north of Tyre and 40 km south of the capital Beirut. In Genesis, Sidon is the son of Canaan the grandson of Noah...
, Tripoli
Tripoli, Lebanon
Tripoli is the largest city in northern Lebanon and the second-largest city in Lebanon. Situated 85 km north of the capital Beirut, Tripoli is the capital of the North Governorate and the Tripoli District. Geographically located on the east of the Mediterranean, the city's history dates back...
, Tyre, and Zahlé
Zahlé
Zahlé is the capital and largest city of Beqaa Governorate, Lebanon. With around 50,000 inhabitants, it is the fourth largest city in Lebanon, after Beirut, Tripoli and Jounieh...
.
History
OttomanOttoman Empire
The Ottoman EmpireIt was usually referred to as the "Ottoman Empire", the "Turkish Empire", the "Ottoman Caliphate" or more commonly "Turkey" by its contemporaries...
domination of Lebanon, which lasted for more than four centuries, was brought to an end on October 6, 1918, with the entrance of the Levant
Levant
The Levant or ) is the geographic region and culture zone of the "eastern Mediterranean littoral between Anatolia and Egypt" . The Levant includes most of modern Lebanon, Syria, Jordan, Israel, the Palestinian territories, and sometimes parts of Turkey and Iraq, and corresponds roughly to the...
Marine Division in Beirut roads. The paper money issued by the Turkish
Ottoman Empire
The Ottoman EmpireIt was usually referred to as the "Ottoman Empire", the "Turkish Empire", the "Ottoman Caliphate" or more commonly "Turkey" by its contemporaries...
Treasury, with a forced exchange rate, suffered the same fate.
In order to normalize economic life in the occupied territories and cover the expenses of the allied forces, English authorities imposed the banknote
Banknote
A banknote is a kind of negotiable instrument, a promissory note made by a bank payable to the bearer on demand, used as money, and in many jurisdictions is legal tender. In addition to coins, banknotes make up the cash or bearer forms of all modern fiat money...
of the National Bank of Egypt
Egypt
Egypt , officially the Arab Republic of Egypt, Arabic: , is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean Basin, the Middle East and the Muslim world...
, the Egyptian currency having been, since October 30, 1916, closely linked to the sterling and entirely covered by securities issued in sterling.
In accordance with the convention signed between the French
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
and the British
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
governments on September 15, 1919, a new occupying authority started to rule Lebanon. French troops replaced the British, under the command of General Gouraud
Gouraud
Gouraud may refer to:* General Henri Gouraud, a World War I French general* Henri Gouraud, a computer scientist.** Gouraud shading, a shading algorithm invented by him....
, who was appointed on October 12, 1919 as "High-Commissioner of the French Republic in Syria
Syria
Syria , officially the Syrian Arab Republic , is a country in Western Asia, bordering Lebanon and the Mediterranean Sea to the West, Turkey to the north, Iraq to the east, Jordan to the south, and Israel to the southwest....
and Cilicia
Cilicia
In antiquity, Cilicia was the south coastal region of Asia Minor, south of the central Anatolian plateau. It existed as a political entity from Hittite times into the Byzantine empire...
, and Commander-in-Chief of the Levant Army". Consequently, the use of the Egyptian currency, suitable for the British Treasury, became inappropriate. To obtain Egyptian pounds, France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, being the sole occupying power, had to offer increasing amounts of francs.
During World War I
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...
, the French franc had maintained its status thanks to advances from the British and American Treasuries. However, in 1919, the French franc registered a drop because of the British government's decision to stop these advances, thus breaking the alliance between the franc, the sterling and the dollar
Dollar
The dollar is the name of the official currency of many countries, including Australia, Belize, Canada, Ecuador, El Salvador, Hong Kong, New Zealand, Singapore, Taiwan, and the United States.-Etymology:...
, and also because of the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
Government's decision to suspend its regulating role of the associated change rates. In order to replace the Egyptian pound, the French government decided, by Decree N° 129 issued by the High Commissioner on March 13, 1920, to endow Syria with a national currency.
On September 1, 1920, the representative of France proclaimed Great Lebanon. In 1920, the Bank of Syria was granted the concession of issuing the Syrian currency, which became legal tender on May 1, 1920. Banknotes issued by this bank were reimbursable to the bearer or at sight by checks drawn on Paris
Paris
Paris is the capital and largest city in France, situated on the river Seine, in northern France, at the heart of the Île-de-France region...
, at the rate of FF 20 for one Syrian pound
Syrian pound
-Use of 10 Syrian pound coins in Norway:The shape of the 10 Syrian pound coin has been found to so resemble the 20 Norwegian krone coin that it can fool vending machines, coins-to-cash machines, arcade machines, and any other coin-operated, automated service machine in the country...
.
As a consequence, an independent, currency-issuing department was established at the Bank of Syria. It was responsible for putting in circulation and withdrawing banknotes. Issuances were made either on behalf of the Treasury in Paris or on behalf of the Bank itself.
Concerning commercial operations, the Issuing Department was to provide the Bank of Syria with banknotes only in exchange of foreign currencies or foreign securities, which constituted, together with the credits granted by the Treasury in Paris, the coverage of the currency in circulation.
Role and Function
The Banque du Liban was established by the Code of Money and Credit promulgated on 1 August 1963, by Decree no. 13513. It started to operate effectively on 1 April 1964. BDL is a legal public entity enjoying financial and administrative autonomy. It is not subject to the administrative and management rules and controls applicable to the public sectorPublic sector
The public sector, sometimes referred to as the state sector, is a part of the state that deals with either the production, delivery and allocation of goods and services by and for the government or its citizens, whether national, regional or local/municipal.Examples of public sector activity range...
. Its capital is totally appropriated by the State.
The BDL is endowed by law, with the prerogatives to fulfill its mission. It can use all measures it deems appropriate to ensure exchange rate stability, specifically the intervention in the foreign exchange market
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...
by buying and selling foreign currencies.
The BDL controls bank liquidity by adjusting discount rates, by intervening in the open market, as well as by determining credit facilities to banks and financial institutions. It regulates banks' credit in terms of volume and types of credit, by imposing credit ceiling, by directing credits towards specific purposes or sectors and setting the terms and regulations governing credits in general.
The BDL imposes on banks reserve requirements on assets and loans as determined by BDL, as well as penalties should shortfalls occur. Investment in TBs may be considered by the BDL as part of the reserve requirements.
The BDL grants licenses for the establishment of banks, financial institutions, brokerage firms, money dealers, foreign banks, leasing companies and mutual funds in Lebanon. The Banking Control Commission controls and supervises these institutions. Conferring with the Association of Banks, the BDL issues circulars and resolutions governing the relations of banks with their customers.
There is a regular coordination between the BDL and the Government in order to ensure consistency between BDL's objectives and those of the Government. Cooperation with the Government implies coordinating fiscal and monetary policy measures. It informs the Government on economic matters that might negatively affect the national economy and currency and suggests measures that might benefit the balance of payments, the price level, public finance and offers advice on how to promote economic growth. It also ensures the relations between the Government and international financial institutions.
The Monetary Policy
A favorable environment has characterized the Lebanese economy in 2003. Lebanon is maintaining its commitment to exchange rate stability and to the soundness of its banking sector, in addition to implementing an ambitious fiscal adjustmentFiscal adjustment
A fiscal adjustment is a reduction in the government primary budget deficit, and it can result from a reduction in government expenditures, an increase in tax revenues, or both simultaneously....
program.
Confidence was boosted by the successful outcome of Paris-II conference, held in November 2002 with the participation of a number of countries and international organizations. An aggregate amount of USD 4.3 billion was pledged in 15-year loans at reduced rates to support the government's economic reform plan for lowering the servicing cost of public debt, which accumulated over the years due to costly reconstruction efforts.
These developments led to a significant drop in TBs' interest rates, followed by a cut in commercial banks' average deposit and lending rates in Lebanese pound (LBP) and in foreign currencies. In parallel, USD holdings were being converted on a wide scale into LBP holdings. Moreover, the BOP performance, which started to improve in May 2002, remained on the same trend, with cumulative surpluses exceeding USD 2 billion at end-April 2003, while BDL assets in foreign currencies stood at more than USD 10 billion, excluding gold.
In the last few months, a strong demand emerged on Lebanese government paper in local and foreign currencies, due to increased confidence, reinforced in April by the Government's ability to pay from the Treasury a maturing USD 500 million Eurobond
Eurobond
A Eurobond is an international bond that is denominated in a currency not native to the country where it is issued. It can be categorised according to the currency in which it is issued. London is one of the centers of the Eurobond market, but Eurobonds may be traded throughout the world - for...
issue, without resorting to rollover as in the past. This was accompanied by a positive assessment by the IMF and major international rating agencies, which considered that Lebanon is on the right track in trying to end its economic and financial difficulties, and that its performance in coping with the aftermath of the war in Iraq
Iraq
Iraq ; officially the Republic of Iraq is a country in Western Asia spanning most of the northwestern end of the Zagros mountain range, the eastern part of the Syrian Desert and the northern part of the Arabian Desert....
is the best in the region.
In the banking sector, equity capital continued to increase, reaching USD 3.5 billion at end-April, and pushing the average capital adequacy ratio to 18%. Despite their modest growth, private sector loans attained 100% of GDP, a unique performance in itself. Deposits grew at an annual 11% rate, reaching USD 47 billion at end-April - more than double the GDP - with a dollarization rate dropping to 68%, from a 74% peak in May 2002. This excellent performance was buttressed by the BDL's efforts to strengthen prudential supervision, paving the way for compliance with Basle-II requirements by a sound banking sector, ready to better manage operational risks, and to improve transparency and good governance.
The government's commitment to decelerate the growth of public debt and to reduce its servicing cost was reflected in the conservative budgets of 2002 and 2003. Coupled with measures to achieve the highest possible proceeds from privatization and securitization, this strategy will be pursued over the medium term, expectedly leading to a public finance recovery.
The Governing Body
The Banque du Liban is managed by the Governor who is assisted by four Vice-Governors, as well as by the Central Council.The Governor is the legal representative of the Banque du Liban, and has extensive authority on the management of the Bank. He is entrusted with the enforcement of the Code of Money and Credit, and the implementation of the Central Council's resolutions. Upon the proposal of the Minister of Finance, the Governor is appointed by decree sanctioned by the Council of Ministers, for a renewable six- year term.
After the consultation with the Governor and upon the proposal of the Minister of Finance, the Vice-Governors are appointed by decree sanctioned by the Council of Ministers for a renewable five-year term. They assist the Governor in managing the Bank, carrying out functions specified by the Governor. In addition, they assume their duties as members of the Central Council.
The Central Council sets the monetary and credit policies of the Bank, including money supply, and discount and lending rates. It discusses and decides, among other things, on issues concerning the banking and financial sectors, the establishment of clearing houses, the issuing of currency and on loan requests by the public sector entities.
See also
- FFA Private BankFFA Private BankFFA Private Bank is a financial services provider in Beirut, Lebanon specializing in the fields of Capital Markets and Wealth Management.Founded in 1994 as a Financial Brokerage House by Jean Riachi, FFA was granted a banking license in 2007 by Lebanon's Central Bank .The Bank also operates from...
- LebanonLebanonLebanon , officially the Republic of LebanonRepublic of Lebanon is the most common term used by Lebanese government agencies. The term Lebanese Republic, a literal translation of the official Arabic and French names that is not used in today's world. Arabic is the most common language spoken among...
- BeirutBeirutBeirut is the capital and largest city of Lebanon, with a population ranging from 1 million to more than 2 million . Located on a peninsula at the midpoint of Lebanon's Mediterranean coastline, it serves as the country's largest and main seaport, and also forms the Beirut Metropolitan...
- Economy of LebanonEconomy of LebanonThe economy of Lebanon is a developing economy, with a private sector that contributes to 75% of aggregate demand and a large banking sector that supports this demand. In 2009, Lebanon ranked 33rd in the Human Poverty Index...
- List of Lebanese Banks
- Lebanese PoundLebanese poundThe Lebanese pound is the currency unit of Lebanon. It is divided into 100 piastres but inflation has eliminated the subdivisions....
- List of Lebanon-related topics
- SolidereSolidereSolidere s.a.l. is a Lebanese joint-stock company in charge of planning and redeveloping Beirut Central District following the conclusion, in 1990, of the country’s devastating civil war...