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Mon 13 Jan 2020 07:56 AM

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Lebanon central bank seeking formal banking controls to ease dollar restrictions

The local currency has lost over half its value against the dollar on the black market

Lebanon central bank seeking formal banking controls to ease dollar restrictions

Salameh said his request was submitted in a memo to Lebanon's prime minister and the finance ministry aimed at "harmonising relations between clients and their banks". Image: AFP

Lebanon's central bank chief said Sunday he has requested special prerogatives to legitimise and regulate controversial controls imposed by banks on transactions in the crisis-hit country.

If granted such powers, Riad Salameh would be able to provide official cover to banks who have been restricting dollar transactions since September without state authorisation.

Salameh said his request was submitted in a memo to Lebanon's prime minister and the finance ministry aimed at "harmonising relations between clients and their banks".

"The intervention of the Central Bank with the approval of the state will provide legal cover for the measures," he wrote in an email to AFP.

The document requests authorities take legal measures to grant the central bank "exceptional powers" to impose "temporary measures" restricting cash withdrawals, transfers abroad, and other banking transactions.

Such a move, according to the memo, would help "regulate these measures and standardise them between banks so that they are implemented in a fair and equal way."

The finance ministry has yet to respond publicly.

Banks have since September arbitrarily capped the amount of dollars customers can withdraw or transfer abroad, sparking fury among clients who accuse them of holding money hostage.

Although no formal policy is in place, most lenders have arbitrarily capped withdrawals at around $1,000 (900 euros) per month, while others have imposed tighter restrictions.

"The main objective of the letter sent to the ministry of finance is to make the controls official," said one banking source.

Banks' restrictions have fuelled panic in a protest-hit country suffering its worst economic crisis since the 1975-1990 civil war.

Sparked by a grinding liquidity crunch, the informal controls are increasingly forcing depositors to deal in the plummeting Lebanese pound.

The local currency has lost over half its value against the dollar on the black market.

The official rate was pegged at 1,507 Lebanese pounds to the greenback in 1997.

In an attempt to rescue their money, some customers have filed lawsuits against banks for trapping their savings.

Facebook groups have been established connecting lawyers to clients seeking to take their banks to court.

Judges have ruled in favour of depositors in "at least four or five cases", with banks filing appeals against the judgements, lawyer Ali Abbass said.

Lebanon has been gripped by anti-government protests since October 17.

Although protests have declined in size, demonstrations continue, increasingly targeting banks and state institutions blamed for driving the country towards collapse.

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