Gov’t new banks plan
is the work of amateurs

Banking Control Commission:

It is the prerogative of the Central Bank

The decision of the government in its Financial Recovery Plan to license five new banks impairs the reputation of existing banks and gives negative signals to global markets about the country and the government itself, said Samir Hammoud Chairman of the Banking Control Commission (BCCL).

“It is the work of amateurs, not professionals,” he said.

This gives the impression that existing banks have become bankrupt and will be replaced by new ones, Hammoud said. The ministers, in this decision didn’t behave in a professional way, although they could be acting in goodwill, he said.

The country needs to reduce the number of banks through mergers, how come the government decides to license new ones, Hammoud said.

Anyway it is the prerogative of the Central Council of the Central Bank (BDL) to license new banks according to the Code of Money and Credit while the government can propose new legislation for the creation of specialized banks, he said.

Hammoud said that weakening the autonomy of BDL negatively affects the country’s rating.

The government said in the Financial Recovery Plan: “In order to help the economy to restart quickly, the Government will contemplate the issuance of five new commercial banking licenses subject to having equity of at least $200 million, 50 percent of which should be fresh money. These banks will dedicate their resources to finance almost exclusively the real economy.”

According to Hammoud, the size of the equity of the proposed banks is not enough to make a difference.

The government ought to recover stolen public assets to repay the debt and must protect the money of depositors instead of deciding to default, it also had the option to postpone repayment, he said.

The direct aggregated losses in the banks’ balance sheets are estimated at LL64 trillion ($18.3 billion, at an exchange rate of LL3,500 to the dollar). According to the government’s plan, these losses can partly be covered by the banks’ current capital base of LL31 trillion. Hammoud said that in this manner the government destroys the capital of banks and makes depositors carry the burden of the remaining losses of LL33 trillion.