Documentary Credits and Facilities that may be granted by BDL to banks and financial institutions

Circular No. 561

To Banks and Financial Institutions

We enclose a copy of Circular/Decision No. 13234 dated 8/6/2020 regarding the amendment of:

• The Basic Decision No. 6116 dated 7/3/1996 (Facilities that may be granted by the Central Bank of Lebanon to banks and financial institutions) attached to Basic Circular No. 23.
• The Basic Decision No. 7144 dated 30/10/1998 (Documentary Credits and Letters of Credit) attached to Basic Circular No. 52.

Beirut, on June 8, 2020

Governor of the Central Bank of Lebanon

Riad T. Safieh

Circular/Decision No. 13234 Amendment of Basic Decision No. 6116 dated 7/3/1996 and Basic Decision No. 7144 dated 30/10/1998

The Governor of the Central Bank of Lebanon, Pursuant to the Monetary and Banking Law, particularly Article 70 thereof, And pursuant to Basic Decision No. 6116 dated 7/3/1996 and its amendments regarding the facilities that may be granted by the Central Bank of Lebanon to banks and financial institutions, And pursuant to Basic Decision No. 7144 dated 30/10/1998 and its amendments regarding documentary credits and letters of credit, And considering the complaints raised by some Lebanese banks regarding difficulties in opening documentary credits for certain import operations, And considering the importance of preserving foreign currency within the best conditions to maintain the general interest for certain essential and vital sectors, And since, as a result of practical application, the rulings of the Central Bank of Lebanon issued on this matter have necessitated improving and facilitating certain conditions for benefiting from them, And pursuant to the powers vested in the Governor to ensure the continuity of the Central Bank of Lebanon as a public service institution,

Decrees as follows:

Article One: First: The text of "Article Fourteen" of Basic Decision No. 6116 dated 7/3/1996 is repealed and replaced with the following text: «Article Fourteen: First, banks may request the Central Bank of Lebanon to secure foreign currency for:

1. A ratio of 90% of the value of invoices exclusively allocated to importing oil derivatives (gasoline, fuel oil, gas).
2. A ratio of 85% of the value of invoices exclusively allocated to importing wheat, medicines and medical supplies, infant milk up to one year of age, and medical materials used in the manufacture of medicines.

Second: To benefit from the provisions of this article, it is required that the imported goods be exclusively allocated for local consumption according to the needs of the Lebanese market.

Third: In order to benefit from the provisions of this article, banks must submit requests subject to this article to the Foreign Operations and Exchange Department at the Central Bank of Lebanon, accompanied by documents related to each import operation, specifically a copy of:

1. The final invoice regarding oil derivatives and wheat.
2. The final invoice certified by the Ministry of Health regarding medicines, medical supplies, infant milk up to one year of age, and medical materials used in the manufacture of medicines; or the final invoice accompanied by Ministry of Health approval for importing medicines when needed.
3. Evidence confirming the entry of goods in the quantities specified in the invoices into Lebanon (such as customs clearance, unloading reports, and "Airway Bill" or "Bill of Lading", by way of non-exhaustive example).
4. A letter of credit when required.
5. Evidence confirming that the concerned bank has transferred amounts to suppliers via a "Swift" message (Form No. 103) related to the invoice or its equivalent.
6. A compliance statement containing at least the information provided in the attached Appendix (Appendix 1).
7. Any other documents that the Central Bank of Lebanon deems necessary.

Fourth: Banks must ensure, under their full responsibility, the validity and legality of the submitted documents, and that the invoices and documentary credits covered by this article are exclusively allocated to import goods as mentioned above for local consumption according to the needs of the Lebanese market.

Fifth: The concerned bank may submit requests including invoices for goods that entered Lebanon up to a maximum of 300 days prior to the submission of the request to the Central Bank of Lebanon.

Sixth: In exceptional cases, if the concerned bank is unable to secure any of the required documents mentioned above, the Central Bank of Lebanon may proceed with the request after obtaining a clear undertaking from it to secure these documents as soon as possible.

Seventh: The foreign currency resulting from exchange operations is deposited, when necessary, in a special frozen credit account at the Central Bank of Lebanon. The interest rate applied to amounts frozen in the aforementioned account is equivalent to the rates applied to current accounts of commercial banks at the Central Bank of Lebanon.

Eighth: The Central Bank of Lebanon transfers the amount due for each import operation to the current account opened in the name of the concerned bank at the Central Bank of Lebanon, after providing it with all required documents.

Ninth: The Central Bank of Lebanon transfers the value of the approved invoice from the concerned bank's account mentioned in the "Eighth" paragraph to its correspondent abroad.

Tenth: Banks must ensure, under their responsibility, the proper application of the conditions stipulated in this article and its intended purpose, subject to the Central Bank of Lebanon taking measures it deems appropriate, particularly obliging the non-compliant bank to:

1. Deposit a special minimum reserve at the Central Bank of Lebanon, non-interest-bearing, equal to twice the value of amounts transferred to the correspondent in violation.
2. Pay compensation equivalent to a penalty clause of 50% of the amount transferred to the correspondent, with this value charged to the client.

Eleventh: The Central Bank of Lebanon shall not grant any client the provisions of this article if they violate its provisions, particularly by failing to comply with the "Second" paragraph thereof.

Article Two: The text of "Article One (bis)" of Basic Decision No. 7144 dated 30/10/1998 regarding documentary credits and letters of credit is repealed.

Article Three: This decision shall be effective upon its issuance.

Article Four: This decision is published in the Official Gazette.

Beirut, on June 8, 2020 Governor of the Central Bank of Lebanon

Riad T. Safieh

Appendix 1 With reference to the invoice/LC no….. for (currency, amount), value (date) related to import (goods), by order of (beneficiary), We confirm that the origin of the goods is …., and the supplier is……. located in………. We confirm that the goods are exclusively for local consumption. We also confirm upon our full responsibility that all goods and products related to/mentioned in this invoice/LC are not subject to prohibitions pursuant to international or national sanctions, either in terms of their origin, suppliers, traders, manufacturers, consignors, shippers, vessels, and means of conveyance or place of taking in charge/dispatch.