Banks to cap rates on dollar deposits

ABL calls for a ceiling of 3.5 percent on interest rates on dollar deposits

The Association of Banks in Lebanon (ABL) called on banks to maintain a ceiling of 3.5 percent interest rates on dollar deposits exceeding $500,000 and with a maturity of less than one year.

The ABL recommended that banks apply the ceiling on all new dollar deposits and on dollar deposits which will mature after the end of March 2012. The ABL also called for lower interest rates on deposits of less than $500,000 and with shorter maturities.

The ABL’s board of directors attributed its decision to the ongoing drop in spreads between the cost of funds and the returns on uses of funds in dollars, the low global interest rates on dollar deposits, and the high level of liquidity in the banking sector.

Spreads between the cost of funds and returns in foreign currencies regressed throughout 2011 ending the year at 1.52 basis points, down from 1.62 bps in January.

Spreads between the average deposit and lending rates were 4.19 bps in December down from 4.3 bps in January. Spreads between time saving rates and the three-month LIBOR rates in dollars declined to 2.75 bps in December from 2.94 bps in January.