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

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BEIRUT, Sept. 16 (Reuters) – A senior French official said it could be difficult for Lebanese banks to stick to the principle that savers should not lose any of their deposits, according to minutes from a meeting in which France outlined measures to help the crippled banking sector.

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.

“We have felt throughout our meetings with senior French officials responsible for the president’s initiative that they support a thriving banking sector,” a senior Lebanese banker who participated in the talks told Reuters.

A French diplomatic source said the talks were part of efforts to implement the economic road map for Lebanon.

In addition to comments on deposits, 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; Written by Edmund Blair; Editing by Tomasz Janowski

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