Proposed Banking Bills in Syria Puts Country’s Economy at Turning Point
Syrian Banking reform seems now to be one of the most confusing and controversial issues after the changes witnessed lately at the economic level in the Syria.
The most important feature of these changes is the question raised by many academic and economic figures regarding the possibility of setting banking regulations within the framework of a comprehensive law, in addition to publishing and discussing these legislations before they are passed.
According to a study carried out by the Syrian economist, Sameer Al Itah, the banking reform draft law is currently the top priority for the because the huge influence of this law on the country’s economy.
Al Itah made the following remarks about the proposed banking law, which the authority has allowed its publication:
· What are the banks to be established? What will be the extent of their suitability for the modern banking services? How will these banks be developed along with the Syrian Commercial and other governmental banks?
· How will the relationship between these banks and the Syrian Central Bank regarding monetary and credit regulations be organized?
· What will be the relationship between the banking law and the companies’ and tax systems laws?
· What will be the relationship between the banking law and monetary systems?
· And finally, what will be the role of the banking law and the laws that should be passed along with it to produce a comprehensive system?
Responding to all these questions, the study of the Syrian academic indicated that the bill reflects the willingness of the Syrian legislator’s to establish commercial banks that will attract investments in cooperation with veteran financial institutions. The bill limits the Arab and foreign participation in the investment to 49 percent of the capital and requires the Syrian Central Bank to ensure the good expertise and reputation of the Arab and foreign banks willing to invest in Syria.
It may be useful to extend the draft law to deal with the pure Syrian- Syrian participation by requiring the Central Bank to ensure good management of the new banks regarding this type of arrangement using competent expertise.
The bill also defines the scope of work for the banks as commercial only limiting their participation in any investment or services projects. The proposed law, with this limitation, prohibits the banks from participating in the local companies specializing in the information technology sector.
According to the Syrian expert, it would be more beneficial to give the new banks the opportunity of controlled and limited investment within certain perimeters, to prevent conflict of interests. The law should also deal with the issue of social security and insurance services provided usually by the banks along with other services. This should continue until a new law for development similar to the social security law is passed.
Another by-law regarding banking confidentiality has been presented for discussion. In this regard, it should be mentioned that Lebanon is accused by the international community of facilitating money laundering. The expert believes that both laws should be combined in the banking law.
The suggested law, the Syrian expert says, implicitly returns authority over the monetary and credit systems to the state’s Monetary and Credit Council and the Central Bank. So the banking draft law wont be complete until it is passed simultaneously with the monetary and credit law, which is supposed to protect the sovereignty of the two institutions. The monetary by-law should also be presented for discussion openly at the parliament before it is passed in its final context.
The expert believes that the banking reform law constitutes a real incentive for amending the accounting and taxation systems in the country and most likely the law of commercial establishments. Private banks should have only one accounting system for taxation purposes and not two. Reasonable taxation rate through the banking law will encourage the new economic trends in Syria and lead to the increase in the state current tax revenues.
As for the companies’ law, the expert believes that provision 15 of the bill should be reviewed to differentiate between the rules regarding membership in the boards, and those regarding the companies’ managing directors in order to attract banking and investments expertise capable of meeting the needs of the shareholders’ representatives.
The expert who graduated from the Polytechnic Institute in France, indicated that the by-law defines in general for the Syrian banks in the Arab Republic of Syria and abroad the freedom for money exchange and ensures their compliance with the rules and regulations in this aspect. It has also put restrictions on provision 12 regarding money transfers abroad.
Responding to a question regarding what the Arab and foreign participating banks would do regarding money exchange rates and whether it would be rational to have different rates, the expert said that all these matters will be clarified in a monetary and credit law that will actually unify exchange rates. He believes that a clear provision should be added to the banking law canceling the application of law number six for the year 2000, which prohibits money exchange.
It has become apparent from the discussion of the Syrian expert that there is a new status for the Syrian economy that should be studied and discussed by the parliament. The banking, monetary, and credit laws should be scrutinized simultaneously so that these laws could be utilized to establish a comprehensive system for the new and existing governmental banks to play a vital role in pushing forward the economic development in the country.