Interest rates
are cut in half

Ceiling on dollar deposits

set at five percent, 8.5 percent on lira

The Central Bank (BDL) has set the maximum interest rate that the banks must pay on deposits in foreign currencies at five percent. Rates for deposits in lira have been set at 8.5 percent. Rates on existing deposits will remain unchanged until they reach maturity.

Current effective interest rates have varied from around six percent to ten percent on foreign currency deposits and from seven percent to 15 percent on lira deposits. The weighted average interest rate on deposits in lira was 9.13 percent in Sept. 2019 and 8.3 percent in Dec. 2018. The corresponding rate on dollar deposits was 6.57 percent and 5.15 percent respectively.

The banks are required to pay in lira half of the interests they owe to their clients on foreign currency deposits, according to a circular by BDL. They will continue to pay the other half of the interest amount in foreign currencies.

BDL said that it will also pay in lira half of the interests it owes to banks on term deposits and certificates of deposits denominated in U.S. dollars. The other half will continue to be paid in dollars.

The Central Bank said that these measures are valid for six months. These are exceptional measures in light of the current exceptional circumstances and aim to preserve the value of deposits of bank customers, according to the circular.

BDL has also instructed the banks that the cut in interest rates on deposit must reflect on the Beirut Reference Rate (BRR). The BRR, which is a reference rate for lending, is issued periodically by the Association of Banks as a recommendation addressed to the banking sector.