Lebanon’s new bank rules offer ‘lollar’ accounts respite

October 5, 2023, 12:02 PM

Lebanon lollar fees commission — Lebanon's Central Bank building in Beirut: Critics say that fees and commissions have been used to reduce dollar deposit liabilities

Fees will be more transparent
$89bn deposit liabilities
Down from $116bn in 2019

The Banque du Liban (BDL), Lebanon’s central bank, has issued a circular limiting fees and commissions that commercial banks can impose on so-called “lollar” accounts.

Circular No. 679 prohibits the imposition of commissions that were established after October 31, 2019 on dollar deposits made before September 3, 2019.

It also obliges banks to publish their calculation methods for bank fees “in a visible place” in their branches and head offices.

The latest move was part of BDL’s effort to check growing commissions and management fees on lollar accounts that critics say is an attempt by commercial banks to reduce almost $90 billion of deposit liabilities.

The term “lollar” refers to dollars deposited in Lebanese banks on the eve of the economic crisis in October 2019. That month, the BDL issued a circular that effectively closed dollar bank accounts, leaving depositors unable to retrieve their money.

Karim Daher, president of the Beirut Bar Association Commission for the Protection of Depositors’ Rights, said that the BDL’s decision is “a small victory” for depositors. If the circular is well-enforced, Daher believes, it could “put an end to the discretion of the banks”.

Since 2021, account holders have been allowed to withdraw but in small amounts and often at a “haircut” rate, which at its peak shaved around 80 percent of the notional value of withdrawals.

Of the over $116 billion that was in bank accounts when the 2019 crisis hit, only about $89 billion remains, with haircuts and commission fees accounting for much of the drop.

According to Daher, such haircut rates and management fees have allowed banks to pass the losses incurred in the crash formally onto their customers. “The banks are acting discretionally against depositors,” he said.

Bank of Beirut fees

Bank of Beirut stirred controversy earlier this week when reports emerged of customer management fees of $100 a month on lollar accounts. The reported fees are roughly 10 times more than those of comparable “fresh dollar” accounts.

“It’s huge,” said Daher. “And on [an] account that isn’t working and on which they are not paying you commission.”

The new circular was signed by the acting governor of the BDL, Wassim Mansouri, who took control of the bank in July following the departure of Riad Salameh.

The former governor stepped down after 30 years in charge of the bank. He has been accused of running a “Ponzi scheme” that relied in part on the dollar deposits mentioned above, and he faces criminal investigations in France, Germany, and Luxembourg.