Lebanon's Banking Collapse After 30 Years
The article addresses the collapse of the Lebanese banking system, which has been gradually unfolding over past decades and has significantly worsened since 2019. This erosion stems from Lebanon’s reliance on a fragile financial model based on attracting foreign deposits, maintaining the Lebanese pound's fixed exchange rate against the dollar, and financing the government through the banks. The decline in financial inflows, coupled with accumulated losses and sanctions on Syria, led to a depletion of liquidity and a widening gap in obligations. As a result, depositors' access to their funds was severely restricted, and the financial system gradually went bankrupt. In 2022, there were also instances of bank invasions by desperate depositors, notably the case of Sally Hafez, who stormed a bank to claim her money to help her sister. The Governor of Banque du Liban, Riad Salameh, stepped down in July 2023 and later faced legal charges related to embezzlement. However, the roots of the crisis lie in years of misguided financial policies, which various political elites and financial institutions participated in. While depositors' funds are still recorded in accounts, access to them at their true value has become impossible, making this one of the deepest economic crises in Lebanon’s modern history.
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