Lebanese Cabinet to review draft legislation on bank secrecy

Special Lebanese Cabinet to review draft legislation on bank secrecy
Lebanon has experienced a flour crisis against the backdrop of the central bank’s failure to open credits for the purchase of imported wheat. (Reuters)
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Updated 14 April 2022

Lebanese Cabinet to review draft legislation on bank secrecy

Lebanese Cabinet to review draft legislation on bank secrecy
  • Document will then go for parliamentary approval, as required by IMF agreement
  • Cabinet were ‘asked to submit their suggestions’ on draft, information minister says

BEIRUT: The Lebanese Cabinet decided on Thursday to review a draft amendment to the bank secrecy law during its next session before referring it for parliamentary approval.

The decision comes after such a requirement was stated in a staff-level agreement between the International Monetary Fund and the Lebanese negotiating team on April 7.

It required: “Parliament approval of a reformed bank secrecy law to bring it in line with international standards to fight corruption and remove impediments to effective banking sector restructuring and supervision, tax administration, as well as detection and investigation of financial crimes, and asset recovery.”

Lebanon must meet all of the conditions set by the IMF before a final agreement can be reached, though the requirements have hampered progress in the negotiations over recent months.

According to the agreement: “Lebanon is facing an unprecedented crisis, which has led to a dramatic economic contraction and a large increase in poverty, unemployment, and emigration. This crisis is a manifestation of deep and persistent vulnerabilities generated by many years of unsustainable macroeconomic policies fueling large twin deficits (fiscal and external), support for an overvalued exchange rate and an oversized financial sector, combined with severe accountability and transparency problems and lack of structural reforms.”

Following the Cabinet session, Information Minister Ziad Makari said: “We reviewed the agreement with the IMF and the ministers were asked to submit their suggestions to be reviewed in a later session.”

The Cabinet agreed to create a headquarters for the National Anti-Corruption Commission in Beirut to enable it to carry out its duties.

Makari added: “We tasked the Council for Development and Reconstruction with supervising the demolition process of the wheat silos,” the bulk of which were destroyed and the rest severely damaged in the Beirut port explosion on Aug. 4, 2020.

“Subsidies on wheat used for Arabic bread will not be lifted. They might be, however, lifted on wheat and flour used for other products such as sweets and pastries,” he said.

Over the past few days, Lebanon had experienced a flour crisis against the backdrop of the central bank’s failure to open credits for the purchase of imported wheat. The stampede to buy bread from bakeries in the southern suburb of Beirut led to shootings.

As a temporary solution, the Cabinet agreed on Thursday to use the $15 million worth of IMF special drawing rights to subsidize wheat, $13 million to subsidize medicine and $60 million to subsidize electricity.

Meanwhile, the United Nations on Thursday launched the Strategic Framework for UN Action in Lebanon for the 2022-25 period.

Najat Rochdi, UN resident and humanitarian coordinator for Lebanon, said the world body would provide support in cooperation with the relevant ministries and the government, and in consultation with the private sector, governorates, civil society and local communities.

She identified corruption as the main issue to be tackled, as well as energy and electricity, education, unemployment and health, insecurity, environmental protection and poverty.

“Poverty rates have doubled, and this is a significant deterioration compared to cases of poverty in other countries,” Rochdi said. “We are witnessing a severe deterioration in the provision of social and basic services at the level of health, education, water and energy.”

She added that there was a “structural defect in the economic model, which must be redesigned and restructured, taking into account the current economic context, the collapse of the exchange rate, the capital control, the lifting of subsidies, and inappropriate policies in terms of supporting infrastructure and the brain drain.”

She called for “thinking outside the box in terms of production,” and noted a deliberate delay in implementing the required reforms.

Rochdi also stressed the need to implement reforms, control corruption, and protect the judiciary and the rule of law.

“We are working on a three-year emergency development plan to curb the economic collapse in Lebanon. We consulted with civil society, the private sector and embassies. We wanted to discuss the possibility of returning refugees who have no work here and we have consulted all parties in Lebanon in this regard,” she said.

“I hope we will reach an agreement on the priorities of cooperation and sign this strategic framework soon, to start actual work for the next three years,” she added.

“We need a high coordination structure and we need to define various priorities. Based on joint programs, we will mobilize resources for the plan and we have actually started contacts in this framework. We must act quickly for the good of the people of Lebanon.”