On June 8, 2021, the Lebanese Central Bank (the “BDL”) issued basic circular No: 158 (basic decision No: 13335) (the “Circular”) that sets out an exceptional framework allowing depositors to withdraw limited amounts denominated in foreign currencies.
On August 5, 2021 and September 29, 2021 the BDL issued intermediate circular No: 592 (intermediate decision No: 13352) (the “Amendment“) and intermediate circular No: 597 (intermediate decision No: 13369) (the “Second Amendment”) respectively, that amended the Circular, bringing clarifying some ambiguities and answering issues faced by banks and depositors in practice.
The purpose of this circular is to (i) identify depositors, accounts and amounts that would be eligible under this Circular, (ii) regulate the withdrawal procedure, (iii) identify the sources of financing and (iv) set forth an oversight mechanism to prevent abuse and ensure proper implementation.
The main takeaways of this Circular are the following:
- Natural person (this means that companies and other entities do not qualify);
- Resident or non-resident;
- Depositors who did not transfer amounts in excess of $500,000 (five hundred thousand United States Dollars) outside Lebanon between July 1st, 2017 and August 27, 2020;
- Depositors who did (i) transfer amounts in excess of $500,000 (five hundred thousand United States Dollars) outside Lebanon between July 1st, 2017 and until August 27, 2020 and (ii) repatriated 15% of such transferred amounts to deposit them in a special account blocked for five years in accordance with basic circular number 154 dated 24/8/2020 ;
- Qualified Depositors who benefit from this Circular will not be able to make withdrawals pursuant to basic circular number 151 dated April 21, 2020 (more about basic circular number 151 here) (“Circular 151”) from any of their accounts (individual, joint or common) from the same bank. Nothing precludes Qualified Depositors from making withdrawals pursuant to this Circular from one bank and making withdrawals pursuant to from Circular 151 from another bank.
Exception: Public and private sector employees who receive their salary in United States Dollar checks may always make withdrawals pursuant to Circular 151, only for the purpose of withdrawing their salary on the then current exchange rate provided for by Circular 151.
Lebanese banks shall, promptly upon issuance of this Circular, screen in their client base for Qualified Depositors and inform them that they are eligible to withdraw foreign currencies pursuant to this Circular.
Qualified bank accounts should be:
- Creditor accounts;
- Foreign currency accounts; and
- Opened before 31/10/2019;
Depositors will be able to benefit from this circular only based on the total balance of their creditor accounts including related accounts (such as joint accounts, common accounts etc.) they are part of, participate in, or benefit from. In other words depositors will be able to benefit from this Circular only once, irrespective of how many accounts they hold in Lebanese Banks.
Account holders benefit from this Circular on the basis of their bank accounts that shall be deemed the extension of their other accounts opened with the same bank before 31/10/2019, especially for the purposes of calculating account movements and deductions required by this Circular, such as without limitation:
- The joint accounts that later become individual accounts;
- The Individual accounts that later became joint accounts;
- Term deposit accounts that became current accounts; or
- Accounts that were transferred to heirs or devisees; or
In the first three examples, the holder of the principal account from which the funds were wired, may benefit from this Circular.
In the case of death, the heirs or devisees may together benefit from this Circular within the same amount limitation provided for in herein.
- Amounts that qualify under this Circular should exclude:
- The “Fresh” Dollar amounts;
- The amounts converted to foreign currencies after 31/10/2019;
- The blocked deposits marked as cash collateral against loans, other facilities, or contingent liabilities;
- Are deducted from the overall withdrawal allowance, the following amounts:
- The amounts in foreign currency withdrawn in cash (banknotes);
- The international wire transfers (including those used to pay university tuition and student accommodation outside Lebanon);
- The local wire transfers executed by foreign correspondents;
- The amounts spent outside Lebanon using international credit cards after 31/10/2019; and
- The amounts already paid and those that would thereafter be paid in Lebanese Pounds against a debt in foreign currency in accordance with §5 of Article 3 (bis) of intermediate circular No: 568 dated February 21, 2001 (more information about this circular here)- until the sooner of 30/06/2022 or the full repayment of the debt.
- Irrespective of how many bank accounts (whether joint, common or otherwise) a depositor may have, the maximum amount he/she may withdraw under this Circular for any given year, is $4,800 (four thousand eight hundred United States Dollars) in bank notes and the equivalent of $4,800 (four thousand eight hundred United States Dollars) in Lebanese Pounds calculated on the exchange rate of the Sayrafa Platform on the date of each withdrawal.
- The Qualified Amount is the lower of (i) the balance available in the Qualified Account on 30/06/2021 and the (ii) balance available on 31/10/2019 – provided that such balance is still available in the Qualified Account on the date of this circular.
- Qualified Depositors (or their legal representatives) may request their bank to open a special sub-account (the “SSA”) no later than 31/10/2021 in order to start making withdrawals pursuant to this Circular with retroactive effect. The withdrawals are only retroactive for the period extending from 01/07/2021 until the date of creation of the SSA, provided however that retroactive withdrawals are only possible for the months during which there has been no withdrawals pursuant to Circular 151.
- After 31/10/2021, Qualified Depositors (or their legal representatives) may still request their bank to open a SSA and benefit from this Circular without retroactive effect. Withdrawals in that case start on the month during which the SSA was created, provided however that there has been no withdrawals pursuant to Circular 151 during that month.
- The SSA’s characteristics are as follows:
- There are no fees or commissions whatsoever;
- It is not interest generating;
- It allows its holder to withdraw foreign currencies in accordance with this Circular;
- If the Qualified Depositors withdraw by check or local wire transfer any amount therefrom (i.e. not in accordance with this Circular), they are deemed to have waived their right to withdraw such amounts in foreign currency under this Circular in the future.
- Qualified Depositor agrees to lift banking secrecy on the SSA only to benefit of the BDL and the banking control commission. All other accounts depositor may have remain under full banking secrecy.
- Qualified Depositor transfers from a designated account, the equivalent of $50,000 (fifty thousand United States Dollars) or less depending on the available and Qualified Amount, in United States Dollars or any other foreign currency, to the SSA. They can also request to start by transferring only $10,000 (ten thousand Unites States Dollars) in order to benefit from this Circular for one year only, with the option to transfer more funds (within the same limits set forth in this Circular) after the end of that year.
- Qualified Depositor may withdraw $400 (four hundred United States Dollars) per month (i) in bank notes, (ii) by transferring this amount to a bank account outside Lebanon, (iii) by spending it using an international debit card or (iv) transferring it to a fresh money account- provided however that these withdrawals do not exceed $4,800 (four thousand eight hundred United States Dollars) per year.
- Qualified Depositor may withdraw the equivalent of $400 (four hundred United States Dollars) per month in Lebanese Pounds converted on the basis of 12,000LBP for one U.S. Dollar as follows:
- Fifty percent (50%) in cash Lebanese Pounds bank notes; and
- Fifty percent (50%) through bank cards.
All the above, provided however that these withdrawals do not exceed an aggregate amount equivalent to $4,800 (four thousand eight hundred United States Dollars) per year in Lebanese Pounds (also converted based on the exchange rate of Sayrafa).
- Qualified Depositors may withdraw their monthly allowances anytime they wish. Any allowance(s) not withdrawn shall accumulate in the account and be deemed an acquired right of the Qualified Depositors who may withdraw them at any time thereafter.
Joint Account holders may agree on how to distribute the amounts to be received in accordance with this Circular. If one of the account holders forfeited his/her right to benefit from this Circular, the other account holder(s) may benefit from the maximum limit under the Circular.
If one of the joint holder has another individual account, and decided to take advantage of the Circular under that other individual account, the other joint holder may still benefit from this Circular for that joint account.
If two or more persons wish to benefit from this Circular in a joint or common account, the amounts would be paid to the account holders pro-rata their share of the amounts transferred from this joint or common account to the SSA.
If one of the joint account holders makes withdrawals pursuant to this Circular, the other joint holder(s) may no longer make withdrawals pursuant to Circular 151 on that same account. Such other joint holder(s) may make withdrawals pursuant to Circular 151 from any other bank accounts they might have at that same bank that is not subject to withdrawals pursuant to this Circular.
Special Sub-Accounts’ Central (the “SSAC”)
- The SSAC shall be formed under the banks directorate of the BDL.
- The SSAC shall oversee the application of this Circular.
- The SSAC shall provide the Governor of the BDL monthly reports containing (i) the balances of the SSAs held with each bank, (ii) the amounts withdrawn therefrom for that month in addition to (iii) a description of each and any breach of the Circular.
- The SSAC shall oversee the withdrawals from the SSAs under this Circular and ensure that no Qualified Depositors exceed the enacted withdrawal limits.
- If the SSAC identifies a Qualified Depositors who exceed the withdrawal limits, it shall notify the governor of the BDL in order to suspend such depositors from benefiting from this Circular and Circular 151 dated April 21, 2020.
Banks shall provide the central for SSAs with monthly reports containing:
- The balances of the SSAs opened with the bank;
- The aggregate amount of foreign currency withdrawn from the SSAs pursuant to this Circular.
Financing of this Circular
The burden of securing financing required to implement this Circular in foreign currency shall be equally borne by the BDL and the banks as follows:
- fifty percent (50%) by the relevant bank, from the accounts it holds with its foreign correspondents; and
- fifty percent (50%) from the banks’ mandatory reserves in foreign currency deposited with the BDL, that the BDL will be releasing for that purpose only. For that purpose the BDL will make monthly transfers of foreign currency to the banks that are in compliance with this Circular (their foreign accounts).
Banks may use their 3% (three percent) foreign currency liquidity ratio required by basic circular number 154 (basic decision No: 13262) only for the purposes of financing the withdrawals set forth in this Circular, provided however that they have an obligation to revert to the 3% (three percent) threshold no later than December 31st, 2022.
- Banks shall, subject to the sanctions provided for in the Circular, grant the Qualified Depositors’ requests to open a SSA.
- Banks shall not refrain from paying Qualified Depositors their monthly allowances unless specifically requested by the BDL to do so.
- Banks shall use the amounts in foreign currency transferred thereto on a monthly basis by the BDL for the purposes of this Circular only. Banks will be held responsible for any misuse in this respect.
- Banks shall not use fresh dollar accounts or external accounts (in the sense of basic circular number 150 amended by basic circular number 554) to finance the withdrawals under this Circular.
- Banks shall not use amounts in foreign currency repatriated by depositors in compliance with article 2 of basic circular number 154 dated 24/8/2020 to finance the withdrawals under this Circular.
- Banks may not impose, whether by way of contract, declaration, undertaking or other document entered into with clients, any liability or condition or undertaking or any other measure not provided for in this Circular.
Banks that do not comply with the provisions of this Circular will be forced to return to the liquidity in foreign currency that it had received from the BDL to its correspondents outside Lebanon and will be subject to the sanctions provided for in article 208 of the Lebanese Code of Money and Credit. These sanctions are:
- Reduction or suspension of credit facilities;
- Prohibition on certain operations or other limitations in the exercise its activity;
- The appointment of a supervisor or temporary manager; and
- De-listing from the BDL list of banks.
Banks’ external auditors shall control their compliance with this Circular and inform the Governor of the BDL of any and all breaches they encounter.
The unit responsible for the implementation of the “Principles of carrying out Banking and Financial Operations with Clients” that was created by basic decision no: 11947 dated 12/2/2015 (basic circular No: 134) is competent to hear, examine, address and decide on any complaint or request submitted from any right holder, with respect to the implementation and execution of this Circular. Said unit shall periodically disclose to, and share with the banking control commission (the “BCC”) the complaints received in this respect.
This circular enters into force on June 30, 2021 and remains valid until all the amounts transferred to the SSAs are released. The conditions and regulations contained in this circular shall remain valid for one year only, subject to modification or extension.