Banking crisis in Lebanon: savers demand their money back

Dozens of depositors who are customers of Lebanese banks have decided to turn to the courts, with the aim of lifting the informal banking restrictions imposed on their savings to get their money back. Since 2019, Lebanon has been plunged into an unprecedented economic crisis. Falling salaries, endemic poverty, sovereign debt default, currency depreciation... Nothing spares the corruption-ridden country.

Lebanon's alarming economic situation

One year after the explosion in the port of Beirut, Lebanon's economic situation continues to deteriorate. According to the Banque de France, the country is facing one of the three worst global crises in 150 years.

The figures are alarming. Firstly, the Lebanese pound has fallen by almost 90% against the dollar on the black market since the crisis began in autumn 2019. Secondly, due to the depreciation of the currency, the Lebanese have been faced with an explosion in inflation, which reached 84.3% at the end of 2020, according to official data.

Another finding: nearly 55% of the population now lives below the poverty line, on less than $3.84 a day, according to a report published by the UN in 2021.

Finally, Lebanon is now in default, with a public debt that stood at $95.6 billion at the end of 2020, according to data from the International Monetary Fund (IMF).

Access to savings limited by unofficial banking restrictions

The liquidity crisis that erupted in Lebanon in 2019 also led to a series of banking restrictions. Since then, no official capital controls have been put in place.

Some savers are seeing their foreign currency withdrawals capped, with substantial discounts on funds of up to 80%. The Lebanese are thus bearing the brunt of banking sector losses estimated at over $72 billion.

Banque du Liban (BDL) posted the biggest losses and is no longer in a position to reimburse the institutions that deposited money with it in return for attractive rates, notably on dollar certificates of deposit.

Customers take legal action to get their money back

Victims of informal banking restrictions in Lebanon, a number of customers have decided to take legal action to try and recover their savings.

Some foreign-based savers have been successful in their claims. For example, a first judgment was handed down in the UK last February in favor of a Lebanese-British man against the banks Audi and SGBL. However, as the proceedings are particularly costly, running into tens of thousands of euros, most depositors are turning to the Lebanese courts.

To date, nearly 400 proceedings have been initiated by the Union des déposants before the interim relief judge (juge des référés) and the courts, but the process is becoming increasingly bogged down by the fact that the banks are generally appealing the decisions handed down.