Local bankers agree the crisis in Cyprus will only have a limited impact on the Lebanese banking sector. Depositors and investors were in a state of panic following a request by the Cyprus Central Bank for banks to temporarily close down. Lebanese banks there remained closed for a few days while the Lebanese Banking Control Commission conducted a stress test on their liquidity.

“The effect of this crisis will be minimal for Lebanese banks since Lebanese investors are not very involved in the market there,” said Joe Sarrouh, Executive Advisor to Fransabank. He said that Lebanese investors prefer banking operations in Geneva, Paris, and London.

According to Sarrouh, Lebanese banks might even benefit from the movement of capital from Cyprus, but “[they] have to be very careful and selective in allowing immigrating capital inwards, especially considering the island’s reputation for money laundering.”

President of the World Union of Arab Bankers, Joseph Torbey, had said earlier that some Arab banks operating in Cyprus would end their operations there if the Cypriot government did not revoke a decision to impose taxes on deposits above €100,000. 

François Bassil, Chairman of Byblos Bank, said: “Because of incessant political turmoil in Lebanon, we have missed several good opportunities over the years. For this reason, Arab depositors would prefer moving their capital to Dubai instead.”

Bassil said the closure of Byblos Bank’s branch in Cyprus was not linked to the financial crisis: “Regardless of what was happening in Cyprus, we were considering closing down our branch in Cyprus because our banking activity there is already low.” Byblos Bank had opened a branch in Cyprus during the Civil War to maintain its local operations. The branch has only some $50 million in deposits.

According to the latest report by the Association of Lebanese Banks (ABL), there are twelve Lebanese banks operating in Cyprus: BLC, BLF, Blom, SGBL, BankMed, BBAC, Byblos, IBL, Credit Libanais, Bank of Beirut, Bemo Bank, and Lebanon & Gulf Bank. The assets of Lebanese banks in Cyprus do not exceed one to two percent of the overall local consolidated banking assets, according to Sarrouh.