Central Bank Governor Riad Salameh assured on Monday that deposits in the Lebanese banks are safe and there will be no capital control.
“We are hearing a lot about capital control these days which is not going to happen. The central bank does not have the right to impose capital control,” Salameh said during a press conference in his first speech since Lebanon’s Oct. 17 protest.
“We are working based on the freedom of transfers from and to Lebanon. It is not normal that people send money to Lebanon but do not have the right to withdraw them later,” Salameh said.
The economic slowdown and the drop in cash injections from the Lebanese abroad reduced the central bank’s foreign currency reserves, leading to a shortage in U.S. dollar for both businesses and individuals.
The situation took place in parallel to nationwide protests against the current political ruling class which resulted in the toppling of the cabinet with banks shutting their doors down for around two weeks for security reasons, as it was announced by the Association of Banks in Lebanon.
The overall complicated situation prompted the Lebanese to withdraw some of their money to store them in their houses with attempts by some people to transfer their deposits to other countries.
The governor said that around 2 billion dollars were withdrawn from Lebanese banks when they opened their doors after a couple of weeks of closure but the money stayed in Lebanon.
The governor added that the central bank’s foreign reserves, excluding gold, currently amount to 38 billion dollars, including Eurobonds and the central bank’s investments, while its monetary capacity in cash is valued at 30 billion dollars.
However, the governor said in his speech that depositors’ money is safe and the central bank will not perform any haircut as it was circulated by the media.
“The central bank does not have the right to do any haircuts and it does not want to do it. I also do not think that it is possible to pass a law that can cut depositors’ money,” he said.
Salameh noted that the central bank adopted a mechanism to protect people’s interests and daily activities by allowing banks to borrow their liquidity needs from the central bank at 20-percent interest rate.
“But this money cannot be transferred outside Lebanon. We asked banks to meet the necessities of people after taking very conservative measures,” he said.
“We also urged banks to allow people to pay their loans in Lebanese pounds without asking them to exchange them into U.S. dollars at high rates from currency exchange companies,” he said.
The high demand for dollar in the past few months has created a parallel market in which 1 dollar is being sold on the black market at more than 1,600 Lebanese pounds which is higher than the official exchange rate.
However, Salameh vowed to maintain the exchange rate.
He said that commercial banks are adopting the official rate of the Lebanese pound to the dollar but currency exchange companies are pricing the dollar according to supply and demand in the market.
On the other hand, bank employees union announced an open strike on Monday until the security situation in Lebanon subsides.
“The banking sector has witnessed an unstable situation. Some employees were exposed to insults while being attacked by depositors in some cases,” said a statement by the union on Monday.
Salameh said he did not know about the open strike, but he assured that it will end eventually.
“The central bank hopes that there will be government soon and we, at the bank, took measures for us not to reach deterioration,” he said.