Conditions for the Establishment of Banks in Lebanon

Text / Section / 1 No. / 79 Date / 2022-6-22 511

We enclose herewith a copy of the Basic Decision No. 7739 dated December 21, 2000, concerning the conditions for establishing banks in Lebanon.

Beirut, December 21, 2000 Governor of the Central Bank of Lebanon Riad Tawfiq Salamah Old No. 1878

512 Basic Decision No. 7739 Conditions for the Establishment of Banks in Lebanon

The Governor of the Central Bank of Lebanon, Pursuant to the Monetary and Banking Law, particularly Articles 121 through 135 thereof, And pursuant to all other prevailing banking laws and regulations, particularly Law No. 99 dated November 6, 1991, and the special laws regarding trading in shares of Lebanese banks, And pursuant to Legislative Decree No. 50 dated July 15, 1983 (Commercial Banks and Medium- and Long-Term Credit Banks), And pursuant to the decision taken by the Central Council in its meeting held on December 20, 2000,

Decrees as follows:

Article One:

1. The minimum capital for Lebanese banks and the capital to be allocated to branches of foreign banks authorized to operate in Lebanon is set at ten billion Lebanese Lira, a portion of which shall be frozen as security with the Lebanese Treasury in an amount determined by the Central Council, and returned interest-free upon liquidation of their operations.
2. The minimum capital for specialized Lebanese banks (commercial banks and medium- and long-term credit banks) and the capital to be allocated to branches of specialized foreign banks authorized to operate in Lebanon is set at thirty billion Lebanese Lira, a portion of which shall be frozen as security with the Lebanese Treasury in an amount determined by the Central Council, and returned interest-free upon liquidation of their operations.
3. This paragraph was amended by Article Three of Interim Decision No. 9455 dated November 9, 2006 (Interim Circular No. 125).

513 Article Two: The application for a license to establish a Lebanese bank shall be submitted to the Central Bank of Lebanon, signed by the founders and accompanied by one original copy and three copies of each of the following documents:

1. A document proving the identity of the founders, holders of economic rights, persons who will subscribe to and capitalize the bank, and persons expected to be appointed to senior executive positions (extract from civil status/ID/passport/copy of commercial registration file if any founder or shareholder is a legal entity).
2. Data signed by each of the aforementioned persons, including their biographical details (degrees, experience, and other material and moral information) and an accurate assessment of their financial standing.
3. A summary from the criminal record of each of the aforementioned persons, not older than three months.
4. A statement on the subscription ratio specified for each of the intending subscribers to the bank's capital, specifying the share class and distribution method.
5. An economic feasibility study concerning the establishment of the bank, covering a three-year forward period and clearly indicating its funding sources and investment outlets, including in detail: a. Estimated profit and loss statement. b. Estimated balance sheets. c. Expected cash flow.
6. A statement clarifying the extent of any direct or indirect association, if any, between the proposed bank and a specific institution or economic group(s) in Lebanon and abroad.
7. A statement clarifying the bank's or founders' participation ratio in other similar institutions.
8. Drafts of: a. The bank's articles of association. b. The proposed administrative structure. c. The principles for organizing internal supervision and auditing. d. An integrated operational system.
9. This paragraph was amended by Article 36 of Interim Decision No. 13440 dated May 27, 2022 (Interim Circular No. 625).

514 Article Three: The application for a license to establish a branch of a foreign bank shall be submitted to the Central Bank of Lebanon, signed by the management of the concerned foreign bank and accompanied by one original copy and three copies of each of the following documents:

1. A certified copy according to regulations of: a. The articles of association of the foreign bank. b. A certificate of registration of the bank in its country of origin or a license granted to it by the competent authorities to conduct banking business. c. A decision of the competent body in the foreign bank including:
   • Approval to open a branch for it in Lebanon, with the purpose of conducting banking business.
   • Appointment of the bank's representative in Lebanon and determination of his powers.
   • Commitment to apply the provisions of prevailing Lebanese laws, regulations, and recommendations and instructions of the Central Bank of Lebanon, particularly regarding capital replenishment for the branch in case of losses. d. Where applicable, a decision by the official competent body in the country of origin permitting the opening of the requested branch.
2. The data and documents specified in paragraphs (1), (2), and (3) of Article Two of this Decision, concerning the bank's representative in Lebanon and persons expected to be appointed to senior executive positions.
3. The data and documents specified in paragraphs (5), (6), and (7) and in sub-paragraphs (b) and (c) of paragraph (8) of Article Two of this Decision.
4. Annual reports on its operations for the last three years, along with the balance sheets related to these years.
5. A certificate from the Ministry of Economy and Trade, Office for the Israeli District, confirming that the foreign bank has no relationship with any Israeli institution.

515 Article Four:

1. The Central Council of the Central Bank of Lebanon grants a license to establish the bank insofar as it deems it serves the public interest, evaluated according to the following criteria and conditions: a. Economic feasibility and expected results over three future years (estimated profit and loss, estimated balance sheet, expected cash flow). b. The material and moral competence of the founders, holders of economic rights, subscribers to its capital, and persons intended to be appointed to senior executive positions, particularly regarding the absence of any criminal or civil judgments against any of them or their partners in Lebanon and abroad for committing ordinary crimes, theft, breach of trust, fraud, money laundering, terrorism financing, or bankruptcy declaration, or regarding the inclusion of any of them on local or international sanctions lists.
2. In addition to what is stated in paragraph (1) of this Article, the Central Council grants a license to establish the bank after ensuring compliance with the conditions specified in prevailing legal and regulatory provisions, particularly regarding: a. Its establishment as a limited liability company or joint-stock company in accordance with Article 126 of the Monetary and Banking Law. b. The share form representing its capital and trading rules for them. c. The administrative structure and principles for organizing internal supervision and auditing to be adopted. d. The participation ratio in its capital, share class, and distribution method. e. Other financial institutions or specific economic groups in Lebanon and abroad, and the presence or absence of direct or indirect association between it and them.

516 Article Five: The Lebanese bank or the branch of the foreign bank licensed for establishment by the Central Council of the Central Bank of Lebanon must complete its establishment procedures within a maximum period of six months from the date it receives the licensing decision, under penalty of cancellation of this license. (This article was amended by Article One of Interim Decision No. 8946 dated January 8, 2005 (Interim Circular No. 78).) (This paragraph was amended by Article 37 of Interim Decision No. 13440 dated May 27, 2022 (Interim Circular No. 625).)

Article Six: This Decision shall take effect upon its issuance.

Article Seven: This Decision shall be published in the Official Gazette.

Beirut, December 21, 2000 Governor of the Central Bank of Lebanon Riad Tawfiq Salamah