Lebanese banks stuck upside down: jobs disappear, loans plunge


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BEIRUT (Reuters) – Lebanese banks, which once fueled the economy by sucking billions of dollars in deposits from abroad, are laying off staff, seeing loan books shrink and looking for liquidity to stay afloat.

FILE PHOTO: Central Bank of Lebanon Governor Riad Salameh speaks during a press conference at the Central Bank of Beirut, Lebanon, November 11, 2019. REUTERS / Mohamed Azakir

About 3,000 bankers, or more than 10% of the banking sector’s workforce, have quit or lost their jobs since a financial crisis erupted in late 2019 – and the numbers keep rising, told Reuters four senior bankers.

De facto capital controls are in place, depositors are deprived of most of their savings, and loans to the private sector have collapsed. In April, bank loans had fallen 25% year on year to $ 33 billion, according to a Byblos Bank note.

“The sector is dead. It doesn’t lend, it doesn’t make a profit, ”said one of the bankers, who requested anonymity.

Banks face their biggest challenge since a civil war from 1975 to 1990, a conflict which, through certain measures, reduced the hangovers of lenders. This crisis has left the nursing sector with a loss of $ 83 billion, according to a government report last year, eclipsing Lebanon’s 2019 economic output of $ 55 billion.

“The crisis in Lebanon is above all a banking collapse,” said Toufic Gaspard, an economist who worked as an advisor to the IMF and as an advisor to a former finance minister.

The financial services sector in Lebanon, which once became the Switzerland of the Middle East, accounted for almost 9% of gross domestic product in 2018.

Backed by a central bank that offered attractive interest rates for fresh dollars to service the country’s booming debt, the banks attracted deposits, especially from the Lebanese diaspora. When that financial house of cards collapsed in 2019, the economy imploded, hammering the banking system.

Salim Sfeir, president of the Association of Banks in Lebanon (ABL), said banks are now surviving in part thanks to the cash generated by “deleveraging” as many Lebanese have withdrawn money from banks to repay the debt. personal and corporate debt. [L5N2NX5S5]

“Under normal circumstances loans are the business of banks, but in such circumstances it gives us liquidity, it gives us fresh air to continue to survive during the crisis,” said Sfeir, who is also Managing Director of Bank of Beirut.

‘NO STRATEGY’

The industry, which employed around 28,000 people before the crisis, now numbered around 25,000, he estimated.

The other three senior bankers gave similar figures for job losses in the sector, adding that the figure continued to grow.

Most of the job losses have been in retail banking, serving traditionally core banking activities such as attracting deposits or selling loans to small and medium businesses that have lost momentum or are falling. are simply collapsed, the sources said.

Job losses have accumulated in a political stalemate that has left Lebanon without a new government, after the cabinet resigned following a massive explosion in the port of Beirut last year that devastated part of the capital city.

Political sclerosis has delayed a deal with the International Monetary Fund, a vital part of a larger bailout aimed at fixing Lebanon’s financial and economic system.

Bankers and analysts said any restructuring of the 40 Lebanese banks should be part of such a comprehensive plan.

“There is no strategy for the banking sector. We operate with zero visibility, ”said another senior banker, adding that banks could only operate in“ continuity mode ”.

The extent of bank losses will only become clear when the government restructures its mountain of debt, rating agency S&P said after the government defaulted last year.

S&P said the cost of restructuring the banking system could range from $ 23 billion to $ 102 billion.

The central bank asked banks to increase their capital by 20% by the end of February and asked banks to increase liquidity by 3% with their correspondent banks.

ABL’s Sfeir said the banks had completed the increase.

“The other guideline was to increase foreign liquidity,” he said, adding that it was “more difficult because you have to liquidate some of your foreign assets, your depositors will have to repatriate part of their deposits to the country. ‘foreign”.

“That’s why it takes time,” he said.

Reporting by Davide Barbuscia; Editing by Samia Nakhoul and Edmund Blair

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