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Lebanon's Parliament approved legislation on the restructuring and rehabilitation of the country's banks, a measure officials say lays the groundwork for restoring order to the nation's shattered financial system after seven years of economic crisis.
Prime Minister Nawaf Salam, speaking after the parliamentary session, called the law's passage "a fundamental reform step that paves the way for restoring order to the financial situation and recovering deposits."
The legislation is aimed at addressing the collapse of Lebanon's banking sector, which has left depositors locked out of their savings for years amid one of the world's most severe financial crises since the mid-19th century, according to the World Bank.
Finance Minister Yassine Jaber said in a written statement that the law represents a key step toward resolving the banking crisis, offering what he described as a more solid framework for regulating the sector.
Under the new legislation, authority over banking circulars is consolidated solely under the governor of the Central Bank. The law also provides for the recapitalization of banks through the issuance of shares to new investors.
In addition, the legislation replaces Lebanon's existing Money and Credit Law with international standards for the banking sector, and grants the state and the Central Bank authority to intervene in order to prevent a potential bank collapse.
Jaber emphasized that a separate bill, the draft law on financial restructuring and the return of deposits, known as the "Financial Gap Law," still needs to complete its review in Parliament.
He said the two pieces of legislation together form the foundation for restructuring the banking sector and would clear the way for finalizing negotiations with the International Monetary Fund.
The Lebanese government introduced the Financial Gap Law draft earlier this year in an effort to reorganize the distribution of losses stemming from the 2019 financial collapse and rebuild confidence in the financial system.
The bill sets out a mechanism for sharing losses among the state, the Central Bank, commercial banks and depositors, and is intended to allow depositors to gradually recover funds that have been frozen for years.
The draft, which aligns with the IMF's vision and conditions for resolving the crisis, still requires parliamentary approval to take effect.
Lebanon's economy has been in freefall since 2019, when a currency collapse, banking sector paralysis and informal capital controls cut off most depositors from their savings, plunging much of the population into poverty.
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