>BEIRUT, Dec 19 (Reuters) – Lebanese Prime Minister Nawaf Salam said on Friday the government had put forward a draft law to address a financial crisis that has crippled the economy for six years, saying it conforms to International Monetary Fund standards and would restore faith in Lebanon.
>The draft law, which will be discussed by the cabinet on Monday, aims to address a vast funding shortfall in the financial system and allow depositors who have been frozen out of their savings to gradually recover their money.
>The World Bank ranks the crisis among the worst globally since the mid-19th century. It froze depositors out of dollar accounts, prevented withdrawals and drove the Lebanese pound down by more than 90%. In 2022, the government put losses from the crisis at about $70 billion, a figure that is now likely higher.
>The draft law, which was distributed to the media ahead of Salam’s press conference, envisions repayments to small depositors – or those with deposits valued at less than $100,000 – in monthly or quarterly instalments over four years.
>Deposits larger than $100,000 will be repaid via asset-backed securities to be issued by the central bank, with no less than 2% of the value paid annually to holders, according to the draft law.
>The maturity period for those securities will be set at 10 years for deposits valued at up to $1 million, at 15 years for deposits valued from $1 million to $5 million, and at 20 years for deposits valued at more than $5 million.
>The certificates to be issued by the central bank for the repayment of some deposits will be backed by the income, revenues and returns of assets owned by the central bank and any proceeds from the sale of assets, if any occur.
>The draft law requires an international auditing firm to carry out an evaluation of the central bank’s assets within one month of the law’s adoption, to determine the size of the funding shortfall.
>Debt owed by the Lebanese state to the central bank will be converted into “a bond whose maturity and annual interest rate shall be agreed upon between the Ministry of Finance and the Banque du Liban”.
>”The draft law puts the responsibility of reimbursing the cash component of the deposits on commercial banks essentially, and deflects any responsibility of the State”, Nassib Ghobril, chief economist at Byblos Bank, told Reuters.
>The draft law also seeks to force the repatriation of large transfers out of Lebanon during the months leading up to the collapse. It said people, including major shareholders in banks, would have three months to repatriate the funds or face a tax of 30% on their value.
>”The draft law may not be perfect — and it is not — but it is a realistic and equitable step toward restoring rights and addressing the collapse,” Salam added.
After months of anticipation, the draft law on restoring financial order and returning bank deposits is set to be reviewed at Monday’s Cabinet meeting.
Prime Minister Nawaf Salam has described the text as “imperfect but fair.” The draft reflects a compromise between the government and Banque du Liban Governor Karim Souhaid, who was present when the proposal was unveiled last Friday. While it prioritizes protection for small depositors, most of the financial burden would fall on the state and large depositors rather than on banks, a design that has not prevented the Association of Lebanese Banks from sharply criticizing the draft even before its publication.
Six years after the financial collapse, the draft raises a central question: who ultimately pays for the crisis? And beyond its accounting mechanisms, does the law establish accountability, or does it merely organize an exit from the crisis without assigning responsibility?
For the first time since 2020, the draft promises concrete compensation for so-called small depositors, offering repayment of up to $100,000 in cash per depositor over four years. This category represents about 84 percent of depositors, a structure broadly consistent with international standards that prioritize the most vulnerable.
But the promise comes after years of losses. Depositors who were forced to withdraw funds since 2020 at sharply discounted exchange rates have already absorbed part of the cost. Those holding deposits in Lebanese liras receive no compensation for the roughly 98 percent loss in purchasing power they have suffered.
More broadly, the draft formalizes a partial write-down of deposits. According to expectations cited by Banque du Liban (BDL, central bank) sources, about 40 percent of total deposits could be written off under various provisions: deposits deemed illegitimate or illicit, deposits converted from pounds to dollars after Oct. 17, 2019, and interest accrued since 2016, which may be canceled.
Medium and large depositors would receive long-term securities with maturities of 10, 15 or 20 years, instruments likely to lose value over time due to inflation and uncertainty.
In principle, haircuts on very large deposits follow the widely accepted loss hierarchy, which holds that wealthy depositors — often sophisticated investors who benefited from high returns — should absorb losses before smaller savers.
However, a highly contentious provision remains. These securities would be guaranteed by BDL revenues, including any future proceeds from gold sales, should they occur. This marks the first explicit reference since the crisis began to the possible use of Lebanon’s gold reserves.
Critics argue that gold is a national asset and should not serve as collateral for compensating a small minority of depositors, estimated at no more than 2 percent of the population.
Another fault line concerns depositors at banks deemed nonviable. They would receive only the guaranteed $100,000, with the remainder dependent on liquidation proceeds. Given that more than half of Lebanese banks reportedly lack sufficient assets, liquidation may cover only a fraction of claims.
The draft also establishes a single compensation cap of $100,000 per depositor across the entire banking sector, regardless of the number of banks involved. This diverges from IMF guidance, which allows the cap to apply per bank when feasible. Lebanese authorities argue that adopting that approach would exceed BDL’s capacity over the four-year repayment period.
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>BEIRUT, Dec 19 (Reuters) – Lebanese Prime Minister Nawaf Salam said on Friday the government had put forward a draft law to address a financial crisis that has crippled the economy for six years, saying it conforms to International Monetary Fund standards and would restore faith in Lebanon.
>The draft law, which will be discussed by the cabinet on Monday, aims to address a vast funding shortfall in the financial system and allow depositors who have been frozen out of their savings to gradually recover their money.
>The Reuters Gulf Currents newsletter brings you the latest on geopolitics, energy and finance in the region. Sign up [here.](https://www.reuters.com/newsletters/reuters-gulf-currents/?location=article-paragraph&redirectUrl=%2Fworld%2Fmiddle-east%2Flebanon-unveils-first-draft-law-recover-deposits-since-financial-crash-2025-12-19%2F)
>It needs to be approved by Lebanon’s fractious parliament.
>The draft law is the first to surface since Lebanon’s [financial system collapsed](https://www.reuters.com/markets/rates-bonds/lebanons-financial-crisis-how-it-happened-2022-01-23/) in 2019 after decades of corruption, waste and unsustainable financial policies.
>The World Bank ranks the crisis among the worst globally since the mid-19th century. It froze depositors out of dollar accounts, prevented withdrawals and drove the Lebanese pound down by more than 90%. In 2022, the government put losses from the crisis at about $70 billion, a figure that is now likely higher.
>The draft law, which was distributed to the media ahead of Salam’s press conference, envisions repayments to small depositors – or those with deposits valued at less than $100,000 – in monthly or quarterly instalments over four years.
>Deposits larger than $100,000 will be repaid via asset-backed securities to be issued by the central bank, with no less than 2% of the value paid annually to holders, according to the draft law.
>The maturity period for those securities will be set at 10 years for deposits valued at up to $1 million, at 15 years for deposits valued from $1 million to $5 million, and at 20 years for deposits valued at more than $5 million.
>The certificates to be issued by the central bank for the repayment of some deposits will be backed by the income, revenues and returns of assets owned by the central bank and any proceeds from the sale of assets, if any occur.
>The draft law requires an international auditing firm to carry out an evaluation of the central bank’s assets within one month of the law’s adoption, to determine the size of the funding shortfall.
>Debt owed by the Lebanese state to the central bank will be converted into “a bond whose maturity and annual interest rate shall be agreed upon between the Ministry of Finance and the Banque du Liban”.
>”The draft law puts the responsibility of reimbursing the cash component of the deposits on commercial banks essentially, and deflects any responsibility of the State”, Nassib Ghobril, chief economist at Byblos Bank, told Reuters.
>The draft law also seeks to force the repatriation of large transfers out of Lebanon during the months leading up to the collapse. It said people, including major shareholders in banks, would have three months to repatriate the funds or face a tax of 30% on their value.
>”The draft law may not be perfect — and it is not — but it is a realistic and equitable step toward restoring rights and addressing the collapse,” Salam added.
For further information, this article delves into deeper detail: [https://today.lorientlejour.com/article/1489127/return-of-deposits-six-key-issues-to-understand-the-governments-draft-law.html](https://today.lorientlejour.com/article/1489127/return-of-deposits-six-key-issues-to-understand-the-governments-draft-law.html)
Text behind payall:
After months of anticipation, the draft law on restoring financial order and returning bank deposits is set to be reviewed at Monday’s Cabinet meeting.
Prime Minister Nawaf Salam has described the text as “imperfect but fair.” The draft reflects a compromise between the government and Banque du Liban Governor Karim Souhaid, who was present when the proposal was unveiled last Friday. While it prioritizes protection for small depositors, most of the financial burden would fall on the state and large depositors rather than on banks, a design that has not prevented the Association of Lebanese Banks from sharply criticizing the draft even before its publication.
Six years after the financial collapse, the draft raises a central question: who ultimately pays for the crisis? And beyond its accounting mechanisms, does the law establish accountability, or does it merely organize an exit from the crisis without assigning responsibility?
Depositors: Delayed protection, losses already borne
For the first time since 2020, the draft promises concrete compensation for so-called small depositors, offering repayment of up to $100,000 in cash per depositor over four years. This category represents about 84 percent of depositors, a structure broadly consistent with international standards that prioritize the most vulnerable.
But the promise comes after years of losses. Depositors who were forced to withdraw funds since 2020 at sharply discounted exchange rates have already absorbed part of the cost. Those holding deposits in Lebanese liras receive no compensation for the roughly 98 percent loss in purchasing power they have suffered.
More broadly, the draft formalizes a partial write-down of deposits. According to expectations cited by Banque du Liban (BDL, central bank) sources, about 40 percent of total deposits could be written off under various provisions: deposits deemed illegitimate or illicit, deposits converted from pounds to dollars after Oct. 17, 2019, and interest accrued since 2016, which may be canceled.
Medium and large depositors would receive long-term securities with maturities of 10, 15 or 20 years, instruments likely to lose value over time due to inflation and uncertainty.
In principle, haircuts on very large deposits follow the widely accepted loss hierarchy, which holds that wealthy depositors — often sophisticated investors who benefited from high returns — should absorb losses before smaller savers.
However, a highly contentious provision remains. These securities would be guaranteed by BDL revenues, including any future proceeds from gold sales, should they occur. This marks the first explicit reference since the crisis began to the possible use of Lebanon’s gold reserves.
Critics argue that gold is a national asset and should not serve as collateral for compensating a small minority of depositors, estimated at no more than 2 percent of the population.
Another fault line concerns depositors at banks deemed nonviable. They would receive only the guaranteed $100,000, with the remainder dependent on liquidation proceeds. Given that more than half of Lebanese banks reportedly lack sufficient assets, liquidation may cover only a fraction of claims.
The draft also establishes a single compensation cap of $100,000 per depositor across the entire banking sector, regardless of the number of banks involved. This diverges from IMF guidance, which allows the cap to apply per bank when feasible. Lebanese authorities argue that adopting that approach would exceed BDL’s capacity over the four-year repayment period.