Beirut bombing tests the mettle of Lebanon's banking sector

Published June 14th, 2016 - 10:00 GMT
People walk past the sign of the BLOM Bank in Beirut, a day after a bomb blast hit its headquarters in Verdun. (AFP/Patrick Baz)
People walk past the sign of the BLOM Bank in Beirut, a day after a bomb blast hit its headquarters in Verdun. (AFP/Patrick Baz)

The bomb attack on one of Lebanon’s leading lenders neither caused panic in the market nor did it prompt people to buy more dollars. In fact, it was business as usual at BLOM’s headquarters as workers cleared shattered glass and smashed furniture on some floors while tellers continued to receive customers.

“The bank continues to provide all banking services at all its branches, and until the damage is repaired, the main branch will continue its operations from the building adjacent to the bank,” BLOM said in a statement issued Monday.

The bank also assured some critics and news media that it was serving all Lebanese sects.

“BLOM Bank represents all segments and confessions of the Lebanese society,” it said.

But this incident came as reminder that the banking sector, seen as the flagship of the country, will be tested further as it tries to cope with mounting U.S. pressure to tighten the noose on the finances of Hezbollah, viewed by Washington as a terrorist group.

This bomb attack will have no impact on the performance of the banking sector nor will it induce customers to convert their deposits from Lebanese pounds to U.S. dollars. Banks will also continue to implement the U.S. Act on Hezbollah despite the attack because we have no other choice,” one banker told The Daily Star.

Following the attack, the Association of Banks in Lebanon held an emergency meeting to express solidarity with BLOM.

After calling on the authorities and security forces to reveal the identity of the perpetrators, ABL repeated that banks are working within the rules applied in international markets and in accordance to the circulars of the Central Bank, hinting that banks are committed to the U.S. Treasury measures against Hezbollah.

However, some economists and financial experts fear that the U.S. Treasury could add more names to the current 99 names.

“The U.S. law is used as a means of pressure on Hezbollah and there is fear that in the next stage the blacklist could grow and this may affect the social stability in the country,” economist Ghazi Wazni said.

He urged the Lebanese authorities to approach the international community in a bid to reduce the ramifications of this law.

Wazni added that Daniel Glaser, the assistant secretary for the Department of the Treasury of the United States, has tried to allay the fears of the Lebanese by assuring that this law is only targeting Hezbollah and not the Shiite community.

“But this visit to Lebanon causes some concern in substance because the law has a political dimension that can be used as tool against Hezbollah by applying pressure on its environment,” he said.

Wazni stressed that the banks are obliged to comply with the U.S law to safeguard this sector.

He reminded that the Lebanese economy is dollarized and the pound is pegged to the dollar.

“Sixty-five percent of customer deposits are in U.S. dollars, 70 percent of our imports in dollars, most of the $7.5 billion remittances are in dollars, most of Lebanon’s foreign debt ($26 billion) is in dollars and most of the Central Bank’s foreign currency ($37 billion) is also in dollars,” Wazni explained.

But the economist argued that Hezbollah opposes this law because it compromises the national sovereignty and monetary policy, even in the national currency.

“Some of the medical and social institutions that were targeted by some banks are not even included in the original U.S. list,” Wazni said.

There were reports that some banks have frozen the accounts of some Shiite social organizations although their names are not listed by the U.S. Treasury, prompting the Central Bank governor and the Special Investigation Commission to urge lenders to adhere to the original list only.

“The Lebanese and monetary authorities must communicate with the U.S. administration so that these American measures will not include the financial transactions conducted by the Lebanese state,” Wazni said.

He added there is no reason to freeze the bank accounts of ministers and MPs because these are not significant transactions.

Former Finance Minister Jihad Azour warned that any attempt to destabilize the banking sector would put the savings of the Lebanese people in jeopardy.

“The Lebanese banks are not the ones that issued these sanctions. They are obliged to comply with these resolutions to avoid the consequences of not complying with these laws,” Azour said.

He stressed that it is imperative that those who were affected by the law to work closely with the banking sector and the Central Bank to contain the negative implications of these measures.

By Osama Habib

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