Moody's, the credit rating agency, has warned that the inability of the Central Bank of Lebanon to provide money for the government program to support imports, and the depletion of mandatory foreign exchange reserves held on behalf of commercial banks, represents a complete collapse of the banking sector.
According to a report issued by the agency, the encroachment on the mandatory reserves of banks maintained in the Central Bank of Lebanon, amidst the continuing government stalemate, would increase the risks of international correspondent banks, which could endanger banking transactions in Lebanese banks, which could have a negative impact on the main pillars of the economy, including trade, tourism, and remittances.
Dealings between commercial banks and the central bank are based on compliance with regulations, including compliance with global anti-money laundering regulations in addition to financial stability requirements. Financial stability requirements include avoiding the equivalent of 15 percent of total foreign deposits, due to the high rates of "dollarization" in the Lebanese economy, which have exceeded 80 percent since last June.
Source (London-based Al-Arab Newspaper, Edited)
