Depositors’ Money from the Perspectives of Economics and Law Symposium at Beirut Arab University

16 November 2022


The Department of Public Relations and Communications at Beirut Arab University organized a symposium entitled “Depositors’ Money from the Perspectives of Economics and Law”. The Dean of the Faculty of Business Administration at the Saint Joseph University Professor Fouad Zmokhol, Dean of the Faculty of Law and Political Science at Beirut Arab University Professor Mohammad Kassem in addition to former Chairman of the Banking Control Commission Mr. Samir Hammoud participated in the symposium that was moderated by economist Mr. Maurice Matta, in the presence of the Chairman of the University’s Board of Trustees Dr. Ammar Houri, President of BAU Professor Amr Galal El-Adawi, a number of diplomats, university presidents, representatives of trade unions, and a crowd of jurists and economists.

The symposium was launched with the Lebanese anthem and the university anthem, followed by a speech from the Director of Public Relations and Communications at the university Mrs. Zina Al-Ariss. In her speech, Mrs. Al-Ariss said, "When I think of Lebanon, I think of a country overwhelmed with crises and complication on the social, health, and service levels. Evidently though, the most severe crisis this small country has gone through is its current financial and economic crisis, which has put its citizens in a state of need and has significantly increased immigration. Not only do the citizens have to suffer, but their children have also been destined the same fate, for the people's money is withheld in the banks with absolutely no plan, solution, nor a future vision to heal and repair. Taking this crisis into account, we are gathered today in this comprehensive symposium along the perspectives of economists and jurists, to observe their perspectives and perceive and suggestions in hope of finding light, albeit a small one, at the end of this dark tunnel.”

Beginning the symposium, Mr. Maurice Matta raised an alarming question about the fate of depositors' money, therefore opening the door for discussion between the participating figures and the audience about the legal and financial problems entailed on the issue of depositors’ money.

Prof. Fouad Zmokhol responded to the question saying, "It is impossible today to recover the depositors' money after the banking, monetary and economic crises damaged Lebanon's reputation, whereby Lebanon’s losses surpassed those of Greece, Cyprus and Argentina, estimating losses to be about 85 percent of the deposits of the Lebanese. These deposits are not protected by law and there is difficulty in recovering them without attracting hard currency. Unfortunately, in light of the lack of confidence in the banking sector, and the fact that the size of the Lebanese economy shrank by 50 percent after the GDP reached 20 billion dollars, this attracting of hard currency will be unattainable.”

Zmokhol confirmed in his speech that the deposits do not exist and indicated that the first beneficiary of this crisis is the state because it reduced its debt from 100 billion before the crisis to less than 10 billion dollars, which equates to 90 percent reduction of the total debts. Zmokhol continued, “Lebanon is not a bankrupt country, but rather the richest country in the world because it owns 50 percent of real estate and many assets.” Additionally, he stressed the need for the new banking sector to keep pace with the economic development process and the need to restore the economic cycle and activity after the major shift from a banking economy to a cash money economy.

Zmokhol confirmed that there is no commitment to the provisions of the International Monetary Fund program, most notably banking secrecy, the approval of the Capital Control Law, the budget and the recovery plan, noting that the government's plan is a liquidation plan and not a plan to restructure banks. Zmokhol stressed that the ones who caused this crisis cannot be part of its solution.

As for Mr. Samir Hammoud, he said, "The depositors' money has not evaporated, but is present with the debtors (the private sector, the Bank of Lebanon, the state). Therefore, the credit rating of the debtor must be looked at to see whether the deposit funds have evaporated or not, determining whether the debtor's literature obliges him to pay the debt”. He noted that in every financial crisis, the depositor is the loser and the debtor is the winner.

Mr. Hammoud believed that the state's commitment to fulfilling their payments in accordance with the law enables banks to pay depositors' money, stressing the need to preserve the deposits until there is a financial capacity to pay them. As for the increase in the volume of the monetary mass in Lebanese pounds, Mr. Hammoud noted that it has always been an advantage for the Lebanese economy over the years, but today it has become a burden on it. He stressed that the focus and efforts should be exerted on resolving the crisis and establishing a unified payment network in LBP rather than on changing the banking system.

Professor Mohammad Kassem said, "Deposits are legally protected among credit contracts, and therefore the rights of depositors are sacred and must be preserved and not violated." He considered that although banks are arbitrary in confronting depositors, preserving the banking sector is a national necessity, noting that breaking into banks is not a solution, just as calling for bankruptcy is not either. According to Professor Kassem, the solution is primarily political accompanied by legislative reform, in conjunction with serious work on the independence of the judiciary.

Mr. Maurice Matta concluded the symposium by talking about the exchange rate, as he pointed out that the state, with all its apparatuses, had failed to address the mobile applications that still control the market, and was surprised by its inability to find a radical solution to this dilemma.