Regulatory Alerts2023-12-28 | 13600Capital Adequacy Regulatory Framework for Banks Operating in Lebanon
The Central Bank of Lebanon issued Decision No. 13600 to amend Article Eight of Basic Decision No. 6939, establishing a comprehensive capital adequacy framework for banks operating in Lebanon. The regulation mandates that banks phase in a 75% reduction of basic capital for specific financial assets over five years, subject to Central Council approval and completion by 31 December 2024. Furthermore, it standardizes the valuation of these assets to US Dollars using a fixed exchange rate published on 30 June 2023, with accounting effective as of 31 January 2023.
Central Bank Circular No. 685 To Banks, Financial Institutions, and Supervisory Delegates
Capital Adequacy Regulatory Framework for Banks Operating in Lebanon Decision No. 13600 dated 28/12/2023 regarding Basic Decision No. 6939 dated 25/03/1998 (The Regulatory Framework for Capital Adequacy of Banks Operating in Lebanon) Referenced Circular No. 44
Beirut, on 28 January 2023 Governor of the Central Bank of Lebanon Mr. Wissam Al Mansouri
Central Bank Decision No. 13600 Regarding Basic Decision No. 6939 dated 25/03/1998
(The) Governor of the Central Bank of Lebanon, Pursuant to Articles 170, 174, and 175 thereof, in light of the Banking Law, particularly the provisions of Basic Decision No. 6939 dated 25/03/1998 and its amendments regarding the Regulatory Framework for Capital Adequacy of Banks Operating in Lebanon, and the Central Council Decision taken in its meeting held on 27/12/2023 regarding orders the following:
Article One: The text of "Article Eight" of Basic Decision No. 6939 dated 25/03/1998 is repealed and replaced by the following:
First: Banks shall establish a comprehensive capital adequacy ratio for all financial assets (direct and indirect ownership of their shares) and financial assets owned by other financial institutions holding their shares, and financial assets owned by other financial institutions exceeding 15% of the Banking Law, in which these banks hold a capital position. This shall be phased in over five years, starting from the date of this decision and subject to its approval and concurrence of the Central Council of the Central Bank of Lebanon with a capital position within the same concerned bank. Second: The basic capital shall be reduced by 75% of the value of financial assets held in shares, subject to the following cumulative conditions:
- Approval and concurrence of the Central Council of the Central Bank of Lebanon, within the same concerned bank, with a capital adequacy position.
- Completion of the capital adequacy position by no later than 31/12/2024. Third: Financial assets subject to this first article shall be converted to US Dollars (USD) and shall be subject to a fixed exchange rate for US Dollars equal to the Lebanese Lira at the official exchange rate published by the Central Bank of Lebanon on 30 June 2023, and accounting as of 31 January 2023.
../.. -2- Article Two: The text of "Article Eight (Part 2)" of Basic Decision No. 6939 dated 25/03/1998 is repealed. Article Three: This decision takes effect upon its issuance. Article Four: This decision shall be published in the Official Gazette.
Beirut, on 28 January 2023 Governor of the Central Bank of Lebanon Mr. Wissam Al Mansouri