On September 14, a depositor took everyone at a bank hostage, demanding that she withdraws her dollar-denominated deposit in USD. Although there were zero casualties, the incident prompted several other hostage situations, all by depositors demanding immediate access to their funds. Banks reacted by closing their branches, to pressure the government to intervene and protect them.  

LIMS noted that the banking crisis stopped financial intermediation—loans and deposits—but international transactions still go through the banking system. The strike will therefore hinder the payment of remittances and import-export operations, as well as local transactions such as payments of salaries and transfers. 

LIMS stated that it does not condone violent approaches, but depositors are losing hope and it looks like they will be recovering a smaller fraction of their funds with the passing of time. The government has been promising small depositors a solution for the last 3 years without any tangible action. Authorities should stop pitting depositors and banks against each other and announce a credible, transparent, and time-bound plan that would allow better recovery rates for depositors. Alternatively, the problem should be settled through the judicial system, with foreign courts having responded in favor of depositors’ claims. LIMS clarified that banks are insolvent and if liquidated, depositors would not recover more than 20% of their funds. The remaining dollar-denominated funds were deposited at the central bank or loaned to the government and both entities are unwilling to service their liabilities in USD.   

Experts suggested converting deposits into shares in a sovereign fund. The fund would receive income from some government-owned assets and the recovery of stolen funds, while paying the funds to shareholders. LIMS revealed that the term sovereign fund is misused as it usually designates a fund owned by a government, not by depositors. Countries rich in natural resources, like oil and gas, prefer to deposit the revenues resulting from those resources in a sovereign fund, instead of spending them. The fund would then invest the money in a portfolio of internationally diversified assets. None of those features would apply to the case of Lebanon.  

LIMS Media Interviews: 

• How Can Capital Controls Protect Depositors? September 3, 2022: Leb Economy, Article AR 
• Raising The Exchange Rate Of Bank Withdrawals ..This Is How Depositors Are Treated Fairly! September 12, 2022: Leb Economy: Article AR 
• Storming Banks… The Lebanese Way To Recover Their Deposits, September 16, 2022: Al Mamlaka TV, TV Interview AR 
• How Can The IMF Look At The Lebanon Crisis? September 16, 2022: Bloomberg Al Sharek, TV Interview AR 
• Patrick Mardini: The Role Of Fintech In Strengthening Banking Sector, September 19, 2022: MTV, TV Interview AR 
• What Does The Sovereign Fund Mean? Is Its Creation Useful For Lebanon? September 21, 2022: MTV, TV Interview AR 
• Today, Banks Remain Unable To Pay Depositors’ Money, And Government Faces Challenge Of The Agreement With The IMF, September 21, 2022: France 24, TV Interview AR  
• Director Of The Lebanese Institute For Market Studies, Patrick Mardini, Commented On Bank Scenes And Dollar Fluctuation, September 22, 2022: Boost Lebanon, TV Interview AR 
• Patrick Mardini: Lebanese Judiciary Does Not Provide Justice To Lebanese Depositors, September 22, 2022: Al Yaman: TV Interview AR 
• Will The Flow Of The “Fresh” Dollars Stop? September 23, 2022: Lebanon Debate, Article AR