The decline of Lebanon’s banking sector during the civil war years resulted in a regulatory slump that saw an overgrowth in the number of banks operating in the country. As a result, the post-war government that was established in the summer of 1992 turned its attention to the disarray by addressing the low levels of control and the high number of financial institutions with Decree Law No. 192, dated January 4, 1993. This law aimed to facilitate bank mergers and was initially valid for five years, until Decree Law No. 679 extended its validity for an additional period ending in January 2003.

Law No. 192

The main points of this bill include the following:

• The chairmen of banks willing to merge their operations (conditional upon approval from the Central Bank governor) have the right to exchange information regarding customers’ accounts.
This was considered by some to be an infringement of banking secrecy laws.

• The Central Bank can give merging banks the necessary loans based on certain conditions to be agreed upon by contract. The law does not specify a ceiling or the average interest rate for the loans.

• The Central Bank has the right to absolve the merging bank from income tax at a rate equal to a portion of the tax on their profits, providing it doesn’t exceed the cost of merging or the amount of LL 2 billion ($1,327,000). In addition, all procedures required to complete the merger are absolved from stamp, moving and registration fees.
 

• Permission to terminate the merged bank’s employee contracts, after providing employees with benefits and legal indemnities. An additional end-of-service indemnity is included with the proviso that it must providing compensation of no less than a 6-month salary and not in excess of a total of three years of income.

Law No. 110

Before promulgating Law No. 192, Law No.110, dated November 17, 1991, related to the reform of the banking situation, was already in place and dealt with the following issues:

• Granting banks that have suffered losses greater than one quarter of their capital, a one-year grace period, in order to recapitalize or have their names removed from the list of accepted banks.

• Giving the Higher Banking Committee substantial authority to liquidate precarious banks.

• The National Institute for Deposit Guarantee undertakes to guarantee the deposits of the relevant banks. ...Full Story