On 21 May 2026, the Central Council of Banque du Liban (“BDL”) issued Basic Decision No. 13819, comprehensively overhauling the framework governing Lebanese Finance Companies (“FC”), the non-bank credit institutions historically known as Financial Institutions (المؤسسات المالية). The decision repeals Basic Decision No. 7136 of 22 October 1998, which had governed the sector for nearly three decades, and is grounded in articles 178 to 184 of the Code of Money and Credit. It was issued in parallel with three other intermediate decisions on the same day, addressing microloans, lending counters and electronic payment cards, that together form a coordinated regulatory package: a single policy moment in which the BDL has reset the rules for non-bank credit provision in Lebanon.
This is not a technical refresh. Since the 2019 financial collapse, the BDL has been progressively reshaping its regulatory perimeter in an effort to restore confidence in the sector, attract foreign capital, formalize informal credit markets and align Lebanese practice with international standards on prudential supervision and anti-money laundering. Decision 13819 is one of the most significant building blocks of that effort. It also reflects a broader rebranding exercise: while the Arabic المؤسسات المالية is unchanged, the corresponding English-language term is now formally Finance Companies in all BDL and Banking Control Commission (BCC) texts. Practitioners should treat the two terms as interchangeable, with the new English term going forward.
The Three-Tier Licensing System
The single most structural change is the move from a single, unified Finance Company license to a three-category system:
- Category A (Lending Operations): the full spectrum of consumer, housing, SME, digital, leasing, factoring and margin lending, each with its own caps;
- Category B (Fiduciary Operations): contracts under Law 520/1996; and
- Category C (Microfinance): microcredit and small loans capped at the equivalent of USD 10,000 per loan, with a six-year maximum repayment.
A Category A holder may also conduct Category C activities without additional licensing or capital, but the reverse is not true: a Category C holder may not move into Categories A or B without obtaining the corresponding licenses and capital. Cross-category licensing requires the BDL’s prior approval and a fresh business plan.
Minimum Capital Requirements
The capital floors have been increased by orders of magnitude and are now cumulative if an FC operates in more than one category:
- Category A: LBP 300,000,000,000 (approximately USD 3,351,955 on the date of publication);
- Category B: LBP 75,000,000,000 (approximately USD 837,989 on the date of publication); and
- Category C: LBP 50,000,000,000 (approximately USD 558,659 on the date of publication).
By way of comparison, the previous regime imposed a single statutory floor of two billion Lebanese pounds (LBP 2,000,000,000), which at the then-prevailing exchange rate represented approximately USD 1,333,333. Read through that lens, the picture is more nuanced than the nominal LBP figures suggest: only Category A is a meaningful uplift in USD purchasing-power terms (approximately 2.5 times the historical floor), whereas the Category B and Category C floors are in fact well below it. The change is therefore less an across-the-board capital raise than a re-tiering of capital expectations to match the risk profile of each licensed activity, with the BDL concentrating its prudential emphasis on Category A. A meaningful consolidation of the sector is nevertheless to be expected, given the cumulative nature of the requirements and the loss of operating leverage for incumbents that had structured around the old single-license model.
New Prohibitions and Prudential Rails
Article 7 of the decision sets out six categorical prohibitions. Two of them are genuinely new compared to the previous regime: the issuance of, dealing in, or facilitation of virtual assets in any form (except as may be specifically authorised by the BDL), and the distribution to shareholders of any profits realised during the financial year 2025 or any prior financial year. The other prohibitions on currency exchange (other than incidental to client transactions), on the shipping of banknotes and bullion, on conducting any activity prior to licensing and full capital subscription, and most importantly on the receipt of any deposits within the meaning of article 125 of the Code of Money and Credit, restate pre-existing restrictions in sharper terms.
On the prudential side, the decision introduces explicit ratios that were not stated with the same clarity in the previous regime. The financial leverage of an FC (total assets to regulatory own funds) is now capped at nine to one (9:1), and liquid assets (with a maturity of less than one year) must represent at least ten per cent of total liabilities and commitments with a comparable maturity. Concentration limits in article 17 align with articles 152 to 165 of the Code of Money and Credit: maximum exposure to a single person or interconnected group of 10% of own funds for residents and 5% for non-residents, with an aggregate cap of 25% of own funds for non-resident exposures.
Governance and Fit & Proper
Decision 13819 elevates the governance requirements applicable to Finance Companies to a level comparable to that traditionally imposed on banks. Every FC must establish a Risk Management unit (or designate a Risk Officer), a Compliance function, an Internal Audit function and a Customer Protection function, with a clear separation of control from execution. The decision now expressly prohibits the outsourcing of Risk Management, Compliance, Internal Audit and Customer Protection to third parties, with a narrow carve-out for information technology security, cyber risk management and IT internal audit, which may be outsourced subject to the BDL’s prior approval.
The Fit and Proper assessment framework, addressed in much less detail under the previous regime, is now codified in Annex 1 around three pillars: honesty/integrity/reputation, merit/competence, and financial soundness. The Central Council of the BDL retains discretionary authority to object to the appointment of the chairman, any board member or any senior manager on public-interest grounds. Such objections are binding. The decision also imposes a detailed Business Plan obligation, with a minimum five-year projection horizon, mandatory stress-test scenarios, and preparation in cooperation with an international audit or consultancy firm; and, for the first time, a mandatory Exit Plan setting out the steps to be taken if business objectives are not achieved, with particular emphasis on protecting clients.
The Microfinance Carve-Out
Article 22 dedicates a full article to the special regime applicable to Category C Finance Companies engaged in microfinance. Category C FCs benefit from a lighter compliance footprint: their compliance function may be limited to the verification unit, and their staff are exempted from the AML examinations of BDL Basic Decision No. 9286 dated 9 March 2006 in exchange for dedicated microfinance training. In return, they are subject to particularly strict credit risk management requirements, including 100% provisioning of microcredit balances as soon as a microloan becomes more than 180 days overdue. They may also open Satellite Offices, subject to strict conditions (located at least 20 kilometres from the main office or any branch; limited to ten offices per branch; restricted to receiving microcredit applications, gathering signatures and delivering cheques; any other activity exposes the FC to being struck off the list of FCs). Each Lebanese Category C branch requires an additional own-funds allocation of LBP 3,750,000,000 (approximately USD 41,899).
Annual Fee, Branching and Sanctions
Every licensed FC must pay an annual BDL fee of LBP 3,000,000,000 (approximately USD 33,520) per licensed category, payable upon obtaining the license and thereafter before 31 January of each year, on pain of license withdrawal for the relevant category. Existing FCs must pay the fee before 30 June 2026 or face strike-off from the list of FCs. A Lebanese FC wishing to open a branch in Lebanon must allocate an additional LBP 15,000,000,000 (approximately USD 167,598 on the date of publication) of own funds per branch; a branch abroad requires three times that amount, plus whatever the foreign authorities impose. The minimum fine for any violation of the decision is LBP 1,000,000,000 (approximately USD 11,173), and violations are also exposed to administrative penalties before the Higher Banking Commission under article 208 of the Code of Money and Credit, as well as criminal prosecution under article 770 of the Lebanese Penal Code.
Practical Impact
For existing Finance Companies, the practical question is the transitional regime. FCs licensed prior to the last quarter of 2025 have six months to submit the Business Plan required by article 10 of the decision. The BDL studies the plan and decides whether the FC may continue or should be struck off. If continuation is approved, a further six months is granted for full compliance.
Looking Ahead
Decision 13819 is, in many respects, a long-overdue modernization of a regulatory framework that had been in force since 1998. The three-tier licensing system, the codified Fit and Proper criteria, the explicit prudential ratios and the new governance restrictions together signal a clear intention to professionalize the sector and align it with the supervisory standards traditionally reserved for banks. Whether the transition is managed smoothly will depend in large part on the BDL’s appetite to grant the article 32 extensions where genuinely needed, on the speed with which the BCC adapts its supervisory tools to the new framework, and on the willingness of existing FCs to recapitalize at a moment when private capital is hardly abundant in Lebanon. The next twelve months will be telling.
Sources
- BDL Basic Decision No. 13819 of 21 May 2026 (Conditions for the Establishment and Functioning of Finance Companies), attached to Basic Circular No. 4 for the Financial Institutions.
- BDL Intermediate Decisions No. 13820 (Microloans), No. 13821 (Conditions for Lending Operations under articles 183 and 184 of the Code of Money and Credit) and No. 13823 (ATMs and Credit/Debit Cards), all dated 21 May 2026.
- Lebanese Code of Money and Credit (Decree-Law No. 13513 of 1 August 1963, as amended), particularly articles 125, 140, 141, 142, 178 to 184 and 208.
- Lebanon Law No. 160 of 27 December 1999 (Financial Leasing); Lebanon Law No. 520 of 6 June 1996 (Fiduciary Contracts).
- BDL Announcement No. 960 of 24 September 2024 (Fee schedule applicable to formalities and requests submitted to the BDL).