Financial Crime World

Banks in Lebanon Must Maintain Strong Capital Buffers

Central Bank of Lebanon Issues New Regulations

Beirut - The Central Bank of Lebanon (BDL) has issued new regulations requiring banks in the country to maintain a strong capital buffer against fluctuations in the exchange rate.

Key Requirements

  • Banks are authorized to hedge up to 60% of their shareholders’ equity against fluctuations in the Lebanese pound (LBP) against the US dollar (USD).
  • Minimum capital adequacy ratio of 10% of risk-weighted assets, including both on-balance sheet and off-balance sheet items.
  • Classification of loans into five categories: standard, watch, substandard, doubtful, and bad debt.
  • Loan grading system with ten categories.
  • Provisioning for non-performing loans (NPLs) regulated by the BDL.

Risk Management Requirements

  • Compliance with international standards for risk management, including the Basel II framework.
  • Distribution of loans and credits into six main portfolios.
  • Maintenance of a legal reserve and provision for general banking risks.
  • Establishment of an internal audit and control unit in accordance with the Principles for the Assessment of Internal Control System issued by the Basle Committee on Banking Supervision.

Anti-Money Laundering and Terrorist Financing Requirements

  • Compliance with international standards set by the Financial Action Task Force (FATF) and the Organisation for Economic Cooperation and Development (OECD).
  • Establishment of a Compliance department.
  • Implementation of policies and measures to prevent cyber crime.

Business Continuity Planning

  • Development of a Recovery Plan consistent with Key Attributes of effective Resolution Regimes adopted by the Financial Stability Board.
  • Business Continuity Plan to ensure business continuity in case of disaster or any other event that may impede normal business operations.

Objectives

The new regulations aim to strengthen the resilience and stability of the banking sector in Lebanon, which has faced significant challenges in recent years due to economic uncertainty and political instability. The goal is to protect depositors’ funds from currency risks and ensure the stability of the banking system.