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Lebanon's Banking Sector Is Bloated And In Need Of Reform
Lebanon faces an unprecedented financial crisis as for years the country's banking sector colluded with government to funnel dollars into the economy at an unsustainable pace. Lebanon's
Prime Minister Hassan Diab noted this in his speech while announcing the country would default on its $1.2 Eurobond, which was due Tuesday, adding that the sector was bloated "four times over."
Bondholders and cabinet members have since turned their attention to the restructuring process Diab stated would follow the default.
One crucial element of Lebanon’s debt restructuring, according to Diab, will be restructuring the country’s banking sector. Analysts have characterized such reforms as inevitable and see substantial downsizing of Lebanese banks, lowering liabilities via a bail-in, foreign buy-ups of Lebanese banks, and other measures as potential options available to Diab’s government. levant
While it remains unclear if the political will exists among Lebanon’s politicians and financial industry to tackle a reform program of this magnitude, according to some experts, any type of bank restructuring would ultimately require a renewal of trust in Lebanon’s financial system to be successful in the long term.
The Lebanese cabinet held a session on Tuesday to focus on an “economic rescue plan” for the country, and debt restructuring talks are set to be held in two weeks, according to Reuters. Such talks would give an indication of what sort of default Lebanon is heading toward, Finance Minister Ghazi Wazni stated on Monday. levant
