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Lebanon's banks and ruling elites are partners in crime

Lebanon's banks and ruling neoliberal elites are partners in crime
7 min read

Joseph Daher

04 October, 2022
To preserve their own wealth and power, the ruling class have consistently opposed changes to the corrupt banking system, deliberately orchestrating a crisis that has plunged the country into poverty and economic collapse, writes Joseph Daher.
Graffiti reading "VIRUS" and "THIEF" covers the facade of a fortified local branch of the Bank of Beirut in the Lebanese capital on May 18, 2020. [Getty]

Earlier this month, private banks in Lebanon closed their doors for a whole week after seven branch robberies in less than 72 hours. The so-called robberies were staged by depositors demanding their funds, which have been illegally blocked since the beginning of the financial crisis in Lebanon in 2019.

After their reopening, banks have been adapting their procedures to the security context, restricting access to their branches only to customers who make an appointment in advance. The Federation of Bank Employees' Unions in Lebanon has announced a sit-in on 12 October in protest at the threats to which employees are subjected on a regular basis.

The private banking system has represented for decades the pillar of the Lebanese neoliberal system. The ruling neoliberal sectarian parties in the country have consistently opposed any significant challenges to the banking system in order to preserve the country’s political economy and therefore the structures of power enabling their domination.

This has been notably reflected in the stark concentration in bank deposits: as of 2018, 0.8% of accounts (24,421 accounts) controlled 51.8% of deposits (USD 85,286 billion), while 60.5% of accounts (1,749,104) controlled only 0.5% of deposits (USD 935 million).

The ruling sectarian and neoliberal actors indeed profit from these banking institutions, and multiple examples exist of tight links between them. Many ruling politicians are major shareholders, such as well-known former prime minister Saad Hariri, a major shareholder in BankMed, or as members of the banks’ boards of directors, like Raya al-Hassan, former finance and interior minister, in BankMed.

The partnership between the ruling class and the banks was pointed out by large sectors of the Lebanese protest movements at its eruption in October 2019. Groups of demonstrators actually attacked different banking establishments and ransacked their respective head offices and branches in various regions of the country.

Protesters and political activists sought these actions to denounce their role and responsibility in the economic crisis and for permitting sections of the big financiers to smuggle their funds out of Lebanon at the beginning of the financial collapse.

The deep cooperation between the Lebanese private banking sector and the Banque du Liban (BdL) on one side, and the ruling sectarian neoliberal political parties on the other, has been strengthened following the end of the Lebanese Civil War.

The signing of the Ta’if Agreement has considerably reinforced the country’s economic liberal order, with a particular insistence on boosting integration into the global economy. In this context, neoliberalism in Lebanon was encouraging foreign investment flows into the country.

These were primarily directed at the banking, financial and real estate sectors, further increasing the heavily financialised nature of the economy, while decreasing the weight of the agricultural and manufacturing sectors.

At the same time, to finance a state afflicted by high levels of corruption and patronage, the state carried out loans from local private banks at exceedingly elevated interest rates. In return, private banks provided appealing rates to depositors, while securing relatively high margins.

The mechanism allowed for the establishment of the artificially engineered USD-LBP peg in 1997 with the introduction of the parity of the Lebanese pound and the state’s debt in dollars, which stimulated the inflow of capital and maintained afloat the ruling political elite system.


Between 1993 and 2019, the Lebanese state spent USD 87 billion in interest to the banks. Over this period of time, public debt expanded from USD 4.2 to USD 92 billion, an increase of more than 2000%, while bank assets augmented by more than 1300% (reaching a total of around USD 248.88 billion) and GDP by only 370%. Moreover, private banks’ net profits rose tremendously from USD 63 million to USD 2 billion between 1993 and 2018, representing a growth of 3,000%.

With the end of this Ponzi scheme managed by Lebanese banks since the October 2019 crisis, depositors in the country have been enduring unilateral and illegal banking constraints on their withdrawals and transfers, in addition to the massive devaluation of the Lebanese Pound by more than 95% since the collapse of the financial system three years ago, and the circulars adopted by the BdL officially enabling the coexistence of multiple rates in the market.

This resulted in many depositors being forced to abide by significant “haircuts” on the value of their deposits if they wanted to obtain fractions of them. This situation has been ongoing with the full consent and cooperation of the Lebanese state’s authorities.

In a report published in January 2022, the World Bank described the crisis as a deliberate depression orchestrated by the elite. The socio-economic consequence of this crisis is dramatic, with multidimensional poverty having nearly doubled between 2019 and 2021, affecting 82 percent of the population last year.

In addition to this, a UN report published in May 2022 stated that “Palestinian and Syrian refugees face disastrous living conditions in Lebanon, with 88 percent living under minimum survival conditions”.

After the country defaulted on its sovereign debt in March 2020, the Lebanese ruling sectarian neoliberal parties have continuously sought to protect the Lebanese banking system. The country’s banks and the BdL retain significant segments of the debt denominated in Lebanese pounds.

The vast majority of private banks and the BdL, backed by the ruling political class, still reject any responsibility for all of the losses imputed to them. Discussions between the Lebanese state and the International Monetary Fund (IMF) began in mid-May 2020 to restructure its debt and negotiate a support program but have barely moved forward in spite of multiple meetings.

At the same time, the main ruling sectarian neoliberal parties have also hindered any real accountability on the operations of banks and politicians linked to them. In May 2021, a law lifting banking secrecy was fully purged of its content.

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At first, the text included the lifting of banking secrecy on accounts belonging especially to ministers, deputies, civil servants, advisers, candidates (former and future) in legislative and municipal elections, and presidents of media boards, as well as by their spouses and children, in particular in matters of corruption and money laundering.

But the irremovable Speaker of Parliament, Nabih Berri, demanded to withdraw the reference to “all judicial authorities in the framework of an investigation” among the parties allowed to lift bank secrecy. The text therefore became ineffective in the absence of the creation of a national commission against corruption. The calls for a forensic audit of the BdL have until now suffered a similar fate.

In these circumstances, major depositors, bankers, and the ruling elites were thus allied in preserving their shared interests. A law was adopted in November 2020 authorizing the lifting of the banking secrecy law for a duration of one year on the accounts of the BdL and those of public institutions pertaining to it.

But the new law did not encompass third parties; in other words, private actors affiliated with the ruling class, which hinder the action of auditors to track the accounts of beneficiaries of acts of corruption and embezzlement in commercial banks.

The opposition of the sectarian ruling class to any actions challenging the power of the banking sector and the BdL and to any efforts at accountability is aimed at protecting their modes of capital accumulation and the key pillar of the neoliberal system in Lebanon.

Joseph Daher teaches at the University of Lausanne, Switzerland, and is an affiliate professor at the European University Institute in Florence, Italy, where he participates in the "Wartime and Post-Conflict in Syria Project." He is the author of "Syria after the Uprisings, The Political Economy of State Resilience".

Follow him on Twitter: @JosephDaher19

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Opinions expressed in this article remain those of the author and do not necessarily represent those of The New Arab, its editorial board or staff.