Lebanon-Syria banking relations

Claims of fund transfer from Damascus to Beirut were not verified through local bank deposit figures

July 5, 2011- According to estimates published by The Economist magazine, $20 billion has fled Syria since March 2011, which reportedly entered Lebanon, in bags through the land borders, or transited through Lebanon to reach other destinations.

Asked about the validity of the mentioned numbers, an official at the Association of the Banks of Lebanon told Al-Akhbar daily that the numbers cannot be verified, only by observing the changes in the activities of local banks. The increase in private sector deposits since the beginning of the year has maintained its regular rate, which means that no substantial amounts of funds have entered the sector, he said.

The deposits of Syrians in local banks range between $20 billion and $25 billion, accounting for 20 percent of the total deposits at commercial banks. Figures published until May 2011 show that private sector deposits grew to $110.47 billion, with an increase of $3.27 billion over the first five months of 2011.

Another economist voiced concerns that Syrian deposits in local banks could be affected by the unrest in Damascus as well as the proposed sanctions on some high-ranking officials, especially that a major part of the said deposits could belong to key officials in the Syrian regime.

Local banks are normally involved in funding projects in Syria, through their Syrian affiliates, and banks operating in Syria have taken some deposits from Lebanon to fund loans in Damascus. Thus, the economist said, the high risk levels have begun to worry local bankers.

Seven Lebanese banks operate in the Syrian market, and Lebanese employees account for half of the employees in private Syrian banks and 30 percent of the total workforce of the sector. The report said Lebanese banks operating in Syria hold more than 51 percent of the total deposits of private banks, accounting for a third of the banking activities there.