BEIRUT: Lebanese banks are quietly letting employees go as they seek to close branches and reduce operational costs amid the collapse of the local currency, the Lebanese pound.
The moves come after the country’s central bank tightened the exchange rate used to withdraw cash in Lebanese pounds from US dollar accounts from domestic banks in the absence of a comprehensive plan to boost the economy, which has been in crisis since 2019.
Since autumn 2019, the central bank has imposed currency restrictions, which currently mean that savers with dollar accounts have only been able to make withdrawals in Lebanese pounds at an exchange rate of 3,900 pounds to the dollar.
However, the dollar is trading at around four times that on the black market.
The Lebanese pound has been pegged to the dollar since 1997.
While some banks are downsizing domestically, others are opting to sell assets abroad.
The number of branches estimated to have closed ranges between 300 and 400 out of a total of 1,100 in the country. Employees and contractors have been the first to feel the effects of the decisions.
George Al-Hajj, president of the Federation of Syndicates of Bank Employees, said that 2021 has been “very hard” for bank employees in Lebanon, adding: “Although no statistics have been conducted to show the exact number of laid-off employees, their number does not exceed 4,500.”
But more bank workers are expected to be dismissed shortly.
“We are in the middle of the storm, and the crisis will persist until Lebanon reaches an agreement with the International Monetary Fund on the restructuring process of the banking sector,” said Al-Hajj.
The number of employees of the banking sector in 2018 was estimated to be about 26,000, working for 61 banks. Since 2019, the sector has lost more than 17 percent of its workforce.
Dr Jassem Ajaka, an economic and strategic expert, warned that “up to 50 percent of bank employees will be laid off.”
He told Arab News: “After the deterioration of the economic situation and the suspension of banking activities due to the decision to block financial transfers, the banking sector is no longer making profits.
“Banks are not charities, and the reality is hard for everyone.”
“The banking sector’s employees constitute a very important share of the middle class in Lebanon and eradicating this group from the economy will further harm Lebanese society.”
Al-Hajj said: “In 2019, the federation saw this crisis coming and urged banks seeking to fire employees to inform the Ministry of Labor of their intentions. Some banks did, but others did not, and thus we do not know the exact number of laid-off employees.”
He added: “The banks’ excuses for mass lay-offs were many. Sometimes it was because the bank was applying an early retirement system, sometimes it was a resignation at a request from the administration, and other times it was the termination of contracts due to economic reasons.”
Many domestic banks are also offering a set of incentives for employees to voluntarily quit.
The average salary of a regular bank employee ranges between 2,000,000 and 2,500,000 Lebanese pounds — equivalent to $100 today but $1,500 before the economic crisis and collapse of the currency.
This year, the Lebanese Federation of Syndicates of Bank Employees issued new protocols on the financial rights of laid-off employees, but Al-Hajj warned that “banks have not been very receptive so far.”
The new rules state that “laid-off employees shall receive 18 monthly salaries as well as a bonus of two months’ salary for every year of employment up until six years; a one-and-a-half-month salary for every year of employment for those who served between six and 12 years; and a one-month salary for every year of employment for those who served more than 12 years and up until 44 years of employment.”
The previous dismissal protocol meant that laid-off employees only received 16 months’ salary in compensation for arbitrary dismissal.
However, some banks have chosen to compensate their employees with 24 months of salary in addition to other incentives, to avoid clashes with laid-off staff.
Al-Hajj said: “In addition to the mass layoffs, another problem that is as serious as the first one has emerged: The devaluation of employee salaries and its tragic repercussions on the living conditions of the Lebanese.
“This problem is only getting worse as the crisis continues and thus, the number of voluntary resignations by highly qualified employees is increasing.
“This will affect the future of the banking sector. Unfortunately, the migration of these people cannot be prevented unless by reconsidering their salaries, which have become worthless.”
Bechara Al-Asmar, head of the General Labor Union, estimated that the number of laid-off employees in Lebanon “since the economic crisis and the beginning of the coronavirus pandemic numbers more than 500,000 people.”
The Lebanese Observatory for Workers and Employees Rights has also said that between 500,000 and 800,000 workers have lost their jobs, forcing the country’s unemployment rate to surge above 50 percent.
It said that of the public sector, military and security employees who have kept their jobs, most have lost about 90 percent of the value of their salaries.
The observatory said that “325 institutions submitted requests to the Ministry of Labor to dismiss employees at the start of 2020.”
It noted the first wave of mass layoffs mainly targeted workers in the tourism sector.
The crisis then extended to small enterprises and the country’s sizable black market.
“The second wave hit the education sector, where more than 2,000 teachers were laid off in 2020, according to the Teachers Syndicate in Private Schools, and their salaries were cut by 40 percent as many students left private education and were enrolled in public schools.”
The observatory said that the mass layoffs also affected “major businesses and institutions that were supposedly solid enough to bear the effects of the crisis, such as the American University of Beirut, which fired more than 1,200 workers, The Coca-Cola Company, which fired 350, and Adidas, which fired 250.”
The multinational retail franchise operator Al-Shaya Group also shut most of its companies in Lebanon and fired employees, the observatory said.
The layoffs also affected “domestic workers and non-Lebanese workers from Asia and Africa, as employers were no longer able to pay them in US dollars.
Vulnerable groups were also affected, such as day laborers and Palestinian refugees, whose numbers are hard to estimate as they are not registered within the social security fund or at the Ministry of Labor,” the observatory added.