France warns depositors in Lebanon might not get cash back: Minutes show

A senior French official has said it might be difficult for Lebanon’s banks to stick to the principle that savers should not lose any of their deposits, according to the minutes of a meeting in which France outlined steps to help the crippled banking industry.

The comments were made during Sept. 10 talks in Paris between senior French officials and a delegation from the Association of Banks in Lebanon (ABL). Reuters reviewed a copy of the minutes, marked confidential.

France has taken the lead in international efforts to push Lebanon’s fractious politicians to implement reforms needed to attract aid and ease a crisis that has paralyzed the banking sector, shutting depositors out of most of their funds.

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“While it is a matter of principle for the ABL that depositors should bear no losses, it may be difficult to defend this to the end. But this is a matter of negotiation,” Pierre Duquesne, President Emmanuel Macron’s envoy to coordinate international support for Lebanon, said, according to the minutes.

Lebanon’s central bank and commercial bankers have sought to prevent a “haircut”, or formal reduction in balances held on deposit accounts.

But savers with US dollar accounts in Lebanon say they have already lost money as they cannot access funds or can only do so by exchanging into Lebanese pounds below market rates.

The Lebanese pound, which was pegged to the dollar for more than two decades, has crashed during the financial crisis.

The French Foreign Ministry had no immediate comment.

“We felt throughout our meetings with senior French officials dealing with the president’s initiative, that they support a prosperous banking sector,” a senior Lebanese banker who participated in the talks told Reuters.

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A French diplomatic source said the talks were part of efforts to implement the economic road map for Lebanon.

In addition to comments on deposits, Duquesne listed other measures needed, including the swift implementation of capital controls and bank consolidation in a country with 64 banks controlled by 32 groups.

On restructuring Lebanon’s mountain of foreign and internal debt, Duquesne said a range of actions was needed. “There is no miracle solution,” he said.

The Lebanese banking group’s representatives, including the association’s head Salim Sfeir, said banks were ready to join “collective efforts” to resolve the crisis and outlined proposals that included their backing for a fund to mobilize state assets, the minutes showed.