Regulatory Alerts2017-12-21 | 12738Central Bank of Lebanon Decision No. 12738 Amending Decision No. 12116 on Debt Restructuring
The Central Bank of Lebanon issued Decision No. 12738 to amend Decision No. 12116 regarding debt restructuring, specifically replacing Article 5 to allow debt settlement or reduction via real estate, shares, and partnership interests subject to Banking Control Committee approval. The amendment establishes a mechanism for the Central Council to approve the creation of liquidation reserves for non-liquidated assets over a twenty-year period at a rate of one-twentieth annually. Additionally, the decision repeals Articles 10 and 11, requiring banks and financial institutions benefiting from Article 5 to obtain Central Council approval for any modifications to their borrowers' loan restructuring plans.
Circular No. 479
For Banks and Financial Institutions
We submit to you, in relation to Interim Decision No. 12738 dated 21/12/2017 concerning the amendment of the Basic Decision No. 12116 dated 26/10/2015 (Debt Restructuring), a copy attached to Basic Circular No. 135.
Beirut, on 21 January 2018
Governor of the Central Bank of Lebanon
Riad T. Salamah
......
Interim Decision No. 12738
Amending Basic Decision No. 12116 dated 26/10/2015
The Governor of the Central Bank of Lebanon,
Pursuant to the Monetary and Loan Law, particularly Articles 70, 174, and 182 thereof;
Pursuant to Basic Decision No. 12116 dated 26/10/2015 concerning debt restructuring;
Pursuant to the decision taken by the Central Council of the Central Bank of Lebanon in its meeting held on 13/12/2017,
Decides as follows:
Article 1: The text of Article 5 of Basic Decision No. 12116 dated 26/10/2015 is repealed and replaced with the following text:
"Debts that have been restructured may be settled or reduced with the value of real estate, shares, and partnership interests owned by the debtor, in accordance with Article 154 of the Monetary and Loan Law, subject to the approval of the Banking Control Committee.
The Central Council, upon the proposal of the Banking Control Committee, shall approve the formation of a 'Real Estate Liquidation Reserve' or a 'Shares and Partnership Interests Liquidation Reserve' over a period of twenty years at a rate of (1/20) annually, in exchange for the non-liquidated real estate, shares, or partnership interests owned by the debtor to satisfy the debts referred to in this Article."
Article 2: The text of Article 10 of Basic Decision No. 12116 dated 26/10/2015 is repealed.
Article 3: The text of Article 11 of Basic Decision No. 12116 dated 26/10/2015 is repealed and replaced with the following text:
"Banks and financial institutions benefiting from the provisions of Article 5 above must obtain the approval of the Central Council, upon the proposal of the Banking Control Committee, for any modification to the restructuring of their borrowers' loans in accordance with the provisions of this Decision."
Article 4: This Decision shall take effect immediately upon its issuance.
Article 5: This Decision shall be published in the Official Gazette.
Beirut, on 21 January 2017
Governor of the Central Bank of Lebanon
Riad T. Salamah