France says Lebanese depositors may not receive all of their money, according to minutes

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BEIRUT (Reuters) – A French official said it could be difficult for Lebanese banks to prevent savers from losing part of their deposits, according to the report of a meeting in which France presented measures to help the crippled banking sector.

FILE PHOTO: Salim Sfeir, President of the Association of Banks of Lebanon and Managing Director of Banque de Beyrouth, is pictured during an interview with Reuters in Beirut, Lebanon, July 22, 2019. REUTERS / Mohamed Azakir

The comments were made during talks on September 10 in Paris between senior French officials and a delegation from the Association of Banks in Lebanon (ABL). Reuters reviewed a copy of the minutes, marked as confidential.

France has taken the lead in international efforts to push Lebanese politicians to implement the reforms needed to attract aid and ease a crisis that has crippled the banking sector, excluding depositors from most of their funds.

“While it is a matter of principle for the ABL that depositors should not bear any losses, it can be difficult to defend this to the end. But it’s a matter of negotiation, ”said Pierre Duquesne, President Emmanuel Macron’s envoy to coordinate international support for Lebanon, according to the minutes.

Lebanon’s central bank and commercial bankers have sought to prevent a “haircut” or formal reduction of balances held in deposit accounts.

But savers with US dollar accounts in Lebanon say they have already lost money because they cannot access the funds or can only do so by exchanging in Lebanese pounds below market rates.

The Lebanese pound, which was pegged to the dollar for more than two decades, collapsed during the financial crisis.

The French Foreign Ministry had no immediate comment.

But a French diplomatic source said France was also pushing for an audit of the Lebanese central bank and the financial sector to be “effectively launched without delay.”

A senior Lebanese banker who participated in the talks told Reuters: “We have felt throughout our meetings with senior French officials dealing with the president’s initiative that they are supporting a thriving banking sector.”

According to the minutes, Duquesne listed other necessary measures, including the swift implementation of capital controls and bank consolidation in a country with 64 banks controlled by 32 groups.

On restructuring Lebanon’s mountain of foreign and domestic debt, Duquesne said a series of actions was needed. “There is no quick fix,” he said.

Representatives of the Lebanese banking group, including the head of the association Salim Sfeir, said the banks were ready to join in “collective efforts” to resolve the crisis and presented proposals that included their support for a mobilization fund. state assets, according to the minutes.

Reporting by Samia Nakhoul and Edmund Blair; Additional reporting John Irish in Paris; Written by Edmund Blair; Editing by Tomasz Janowski

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