Banking Reform Law

Once upon a time in Lebanon (10)

As the Lebanese civil war drove several banks into financial distress and bankruptcy, Law No. 110 was passed on October 7, 1991 to reform the banking sector.

The Law sets out a number of measures and procedures to reform the banking sector and compensate the depositors of bankrupt and troubled banks. It includes the following provisions:

• Establishing a special court in Beirut called the Special Banking Court.
• Based on a referral from the Governor of the Banque du Liban (BDL), the Court shall decide, within a period ending on December 31, 1993, to seize any bank that was found to be no longer in a position to continue its business.
• The movable and immovable assets of the Chairman, the Members of the Board of Directors and many officials of the seized bank shall be held in reserve to ensure their compliance with responsibilities, without the need to file a lawsuit to prove the seizure.
• The aforementioned persons shall be deemed to have waived banking secrecy.
• BDL shall have the rights and assets of the National Deposit Insurance Corporation.
• The National Deposit Insurance Corporation shall guarantee the deposits of the banks to be seized in accordance with the provisions of this Law.

Lebanon has witnessed since October 17, 2019 the greatest financial and banking crisis in its history. Yet, two years later, no law has been passed to address the banking situation, reform the banking sector and enable depositors to recover their deposits.