Lebanonupdated 21m ago2 min read
IMF Says Further Work Needed to Agree on Lebanon Banking Sector Restructuring
“Lebanon’s parliament adopted the Bank Resolution Law in August, but President Joseph Aoun challenged it”
“Although the Lebanese cabinet submitted a draft version of the bill to parliament in 2025”
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IMF: agreement on restructuring Lebanon's banking sector needed to unlock billions in aid Bank resolution law remains a key sticking point in talks toward new reform program
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IMF presses banking deal
The International Monetary Fund said it needs further work to reach an agreement on restructuring Lebanon’s banking sector, describing the step as a prerequisite for unlocking billions of dollars in international financial assistance. The IMF said its mission concluded four days of discussions in Beirut that began on Tuesday, and it cited “progress in further clarifying the approaches under consideration by the Banque du Liban (BdL) and the Government” on banking sector reform, a draft financial regulation law, and the recovery of depositors’ funds.
The IMF warned that “Further work is needed to reach an agreement on a strategy for an effective and durable restructuring of Lebanon’s banking sector, leading to a sound and resilient system,” while it said substantial hurdles remain before a comprehensive bailout can move forward. Finance Minister Yassin Jaber said Beirut hopes to “achieve progress that would allow us to reach an agreement on a program with the IMF and sign it during the first quarter of next year, and by its end at the latest.”
Financial gap law deadlock
The IMF said a law on the distribution of losses in the banking sector, known as the financial gap law, remains a key sticking point because parliament has still not voted on it. The cabinet submitted a draft version of the bill to parliament in 2025, but commercial banks and rival political factions prevented lawmakers from bringing the text to a vote, according to Middle East Online.
The National said the IMF cited the implementation of the Bank Resolution Law and the Financial Stabilisation and Deposits Recovery Law, or the financial gap law, as “essential to restore financial stability and maximise deposits recovery” once they are adopted. President Joseph Aoun appealed against Lebanon’s August passage of a bank resolution law at the Constitutional Council over an amendment concerning the central bank’s independence and power, and the IMF said it would assess any changes for consistency with international standards.
Deposit recovery and next steps
The IMF said it remained critical that the Financial Stabilisation and Deposits Recovery Law “upholds the hierarchy of claims in the allocation of losses, thereby maximising protection for depositors.” The National described Lebanon’s crisis as leaving depositors deprived of access to all of their funds and shifting the economy toward cash liquidity, while the IMF said further talks were needed to maximise deposit repayments while ensuring consistency with Banque du Liban’s liquidity positions and public debt sustainability.
Traders Union said the IMF emphasized that the banking resolution law should be applied in all cases to support a transparent and predictable process for handling banks and liquidating them, and it also stressed criteria to maximize deposit repayment based on Banque du Liban’s liquidity, the banking sector’s condition, and debt sustainability. The IMF mission chief Ernesto Ramirez Rigo said the mission looks forward to continuing engagement with the authorities to make further progress “in the coming weeks,” and he said the IMF remained fully committed to supporting Lebanon in designing and implementing a comprehensive economic reform programme.