BELIEF, Bank Restructuring, Banking Crisis, Economic Update

Lebanon Orders Repatriation of Post-2019 Capital Transfers

14:56 | 31 August 2025LIMS output
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Lebanon’s Financial Prosecutor has ordered individuals and companies, including bankers, to repatriate funds transferred abroad after the country’s 2019 financial collapse. The directive, which sets a two-month deadline, seeks to compel the return of capital moved out of the banking system during a period when ordinary depositors faced informal capital controls.

LIMS cautioned, however, that the crisis is often mischaracterised by conflating three distinct categories of funds: post-2019 transfers by connected individuals, stolen public money linked to government expenditure, and the so-called “financial gap” — a catch-all measure that includes central bank losses.

While public debate has focused largely on blaming the banking sector for the third category, LIMS argues that the bulk of the gap is rooted in state spending, notably loans to cover Électricité du Liban’s deficits and a costly subsidy programme launched in 2020. Losses of this nature cannot be attributed to commercial banks.

By contrast, funds transferred abroad after 2019 represent the portion most directly linked to banks. This, LIMS argues, underscores the importance of the judiciary’s investigation to determine the true scale of outflows, which it estimates amount to roughly 20 per cent of the overall gap. Recent amendments to the bank secrecy law empower judges to lift secrecy protections, obliging banks to disclose transfers and their beneficiaries.

LIMS welcomed the move as a critical step toward transparency, noting that identifying and quantifying the transfers is as important as their recovery. But it warned that the state must not use this focus on private transfers to deflect responsibility for broader financial mismanagement.

This positive reform measure, if implemented effectively, could restore liquidity, rebuild confidence in the banking system and lay the groundwork for wider financial and economic stabilization.

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