Lebanon banking overhaul talks advance as IMF seeks resolution framework

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Lebanon banking overhaul talks

Highlights

IMF staff reported progress with Lebanese authorities on aligning the draft Financial Stabilization and Deposits Recovery Law with international standards for banking sector restructuring.
IMF emphasized that the Bank Resolution Law should apply broadly to ensure a transparent and predictable process for bank resolution and liquidation, aiming for a durable restructuring strategy.
IMF insisted the law must preserve the hierarchy of claims to maximize depositor protection, linking repayment plans to the central bank's liquidity, banking sector conditions, and public debt sustainability.

Restructuring plan and legal framework

As reported by the International Monetary Fund, its staff mission to Beirut says discussions with Lebanese authorities have advanced on the banking sector restructuring strategy, particularly on aligning the draft Financial Stabilization and Deposits Recovery Law with international standards.

The IMF team, led by Ernesto Ramirez Rigo, says progress has been made since the September staff visit in clarifying approaches under consideration by the government and Banque du Liban. It adds, however, that more work is still needed to reach agreement on an effective and durable strategy for restructuring Lebanon’s banking sector into what it describes as a sound and resilient system.

The fund says the Bank Resolution Law should be applied in all cases to support a transparent and predictable process for bank resolution and liquidation. It also says further discussions are needed to set criteria that maximize deposit repayments while remaining consistent with Banque du Liban’s liquidity position, banking sector conditions, public debt sustainability and the restoration of the central bank’s solvency.

Implications for depositors and reform efforts

The IMF says it is critical that the Financial Stabilization and Deposits Recovery Law preserves the hierarchy of claims in allocating losses, a step it views as necessary to maximize protection for depositors. That position places depositor recovery at the center of the ongoing debate, while tying repayment plans to broader fiscal and financial constraints.

Engagement between the IMF and Lebanese authorities is expected to continue in the coming weeks as both sides work toward a broader economic reform program. The fund says it remains committed to supporting Lebanon’s efforts to design and implement a comprehensive reform agenda in line with its policies and mandate.

We have previously detailed the World Bank package backing Bolivia’s fiscal reform and private sector job creation drive.

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