Lebanon will probably restructure debt, foreigners will be paid-senior banker

Salim Sfeir, chairman of the Association of Banks in Lebanon and chief executive of Bank of Beirut, is pictured during an interview with Reuters in Beirut, Lebanon. (File/Reuters)
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Updated 13 January 2020

Lebanon will probably restructure debt, foreigners will be paid-senior banker

  • One of the world’s most heavily indebted states, Lebanon is mired in a deep financial crisis
  • The crisis is rooted in decades of state corruption and bad governance

BEIRUT: Lebanon’s sovereign debt is probably going to be restructured in a way that hurts neither the economy nor depositors, and foreign holders will be repaid, the banking association head said on Monday.
Salim Sfeir also said he did not foresee problems with a proposal for Lebanese banks to swap their holdings in a maturing March Eurobond of $1.2 billion for longer dated notes, describing such swaps as “common practice.”
Central bank governor Riad Salameh has proposed the swap to Lebanese banks though it is up to the government to decide, senior financial and government sources said.
One of the world’s most heavily indebted states, Lebanon is mired in a deep financial crisis. A dollar shortage has led banks to control access to deposits and block transfers abroad.
Sfeir, the Bank of Beirut’s chief executive, said he had not seen such a crisis during his 50 years in banking.
“Everything we are doing is to preserve the wealth of Lebanon in Lebanon. If not, it will evaporate and Lebanon will be left without liquidity or foreign currency needed for essential goods,” he told Reuters.
“What is being done now is not against the people. Their money is secured and, let me add, the pressure is not from the large depositors.”
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The crisis is rooted in decades of state corruption and bad governance. Lebanon’s gross public debt is $89.5 billion, 38% of it in foreign currency. Lebanese investors hold the bulk of the debt. Foreigners hold 30% of the Eurobonds.
“Probably the debt is going to be restructured in one way or another but without affecting the deposits of the people and they are currently working to assure that,” Sfeir said. This would “give more oxygen in order to stimulate our economy.”
Asked how the restructuring should take place, Sfeir said this would be the responsibility of a new government. But the general idea is that “interest rates would go down and maturities would be extended.”
Politicians have failed to agree a new government or a rescue plan since Saad Al-Hariri quit as prime minister last October.
Lebanese Eurobonds of $2.5 billion are set to mature this year.
“Of course foreign holders will be repaid,” Sfeir said.
He said the aim was “not to leave any hard feelings with the international community.”
“By restructuring, let us define what we mean. Restructuring is not hurting anybody. Restructuring is working on (maturity) time and interest rates. It does not mean surgical operations,” he said.
Sfeir also said he opposed the formalization of the banking controls, saying it would then be “difficult to return to normal practice.”
The central bank told banks to increase their capital by 10% by the end of 2019 and a further 10% by June 30, 2020, to help them withstand the crisis.
All banks are working on this, Sfeir said.
“Now what is the probability of success with each and every bank? I don’t know, but I don’t anticipate major difficulties,” he said.


UK lends $22bn to small firms hit by coronavirus

Updated 27 May 2020

UK lends $22bn to small firms hit by coronavirus

  • The finance ministry offers banks a 100% credit guarantee on loans of up to $61,479
  • The money was lent to 608,069 small businesses as of May 24

LONDON: British small businesses have borrowed more than $22 billion under a government-guaranteed coronavirus credit program during its first three weeks of operation, outpacing bank lending under other schemes for bigger firms.
The finance ministry offers banks a 100% credit guarantee on loans of up to 50,000 pounds under its Bounce Back Loan Scheme, after an 80% guarantee slowed lending under an earlier program.
The BBLS has lent $22.74 billion to 608,069 small businesses as of May 24, up from $17.36 billion by May 17.
By contrast an earlier program that lends up to 5 million pounds, the Coronavirus Business Interruption Loan Scheme, has only lent $10 billion since its launch in March.
Banks have approved about half of loan applications under CBILS so far, compared with 79% for the BBLS.
Finance minister Rishi Sunak initially opposed offering full state guarantees for bank lending, due partly to the risk of bad debts, but allowed it for the smallest firms after pressure from business groups, legislators and the Bank of England.