Central Bank of Lebanon Circular No. 525: Amendment of Decision No. 7835 Regarding Mandatory Reserves

Circular No. 525

For Banks

Enclosed is a copy of Central Bank Decision No. 102 dated 3/9/2019 amending the basic Decision No. 7835 dated 2/6/2001 (on mandatory reserves) attached to Basic Decision No. 84 dated 2/6/2001.

Beirut, September 3, 2019

Governor of the Central Bank of Lebanon

Riad Salameh

Central Bank Decision No. 102 dated 3/9/2019

Amending Basic Decision No. 7835 dated 2/6/2001

Regarding Mandatory Reserves

The Governor of the Central Bank of Lebanon,

Pursuant to the Monetary and Loan Law, specifically Articles 174, 70, 76, and 79 thereof,

Pursuant to Basic Decision No. 7835 dated 2/6/2001 and its amendments regarding mandatory reserves,

Pursuant to the competencies returned to the Governor to ensure the continuity of the Central Bank of Lebanon based on the principle of the continuity of public service,

Decides as follows:

Article One: The text of items (h), (w), and (z) of Section "Sixteenth" of "Article 10 bis" of Basic Decision No. 7835 dated 2/6/2001 is repealed and replaced with the following text:

« -h: The loan value shall not exceed:

• 80% of the value of Lebanese-origin exports expected during the year the loan is granted, and at least 25% export ratio for institutions that have previously exported, as specified in paragraph (d) of item (1) of this clause.
• 60% of the value of expected Lebanese-origin exports during the year the loan is granted, for institutions that have not previously exported at the 25% ratio specified in paragraph (d) of item (1) of this clause. »

-z: The loan value shall not exceed seven billion and five hundred million Lebanese Lira. The loan shall be granted for a period of one year, with the lending cap reviewed based on the export ratio during the previous year, such that it does not exceed 80% of the value of exports during the said year. »

Article Two: The text of item (a) of "Article 13" of Basic Decision No. 7835 dated 2/6/2001 is repealed and replaced with the following text:

-a: For loans in Lebanese Lira that benefit from state interest subsidies: 1- At a rate of 150% of the balances of loans granted to finance the environmental part of green projects in non-energy sectors (classified and non-classified), provided that the interest and commissions of any kind applied to these loans exceed the rate of 3% minus 50% of the yield of Lebanese Treasury bonds for one year, calculated annually from the date the loan is put into effect, provided that it is less than the interest calculated at the signing of the loan contract.

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-2-

2- At a rate of 150% of the balances of loans granted to finance the environmental part of green projects in the energy sector (classified and non-classified), provided that the interest and commissions of any kind applied to these loans exceed the rate of 3% minus 50% of the yield of Lebanese Treasury bonds for one year, calculated annually from the date the loan is put into effect, provided that it is less than the interest calculated at the signing of the loan contract. »

Article Three: The text of the last paragraph of "Article 27 bis" of Basic Decision No. 7835 dated 2/6/2001 is repealed and replaced with the following text:

The "first" section of "Article 10 bis" and the loans "sixth" of this Decision may have their repayment schedules restructured for this purpose by converting them from Lebanese Lira to US Dollars. »

Article Four: The text of the form (-011RO) attached to Basic Decision No. 7835 dated 2/6/2001 is repealed and replaced with the new text attached to this Decision.

Article Five: This Decision shall enter into force upon its issuance.

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

Beirut, September 3, 2019

Governor of the Central Bank of Lebanon

Riad Salameh

Central Bank of Lebanon

Directorate of Statistics and Economic Research

Form No. (1/5) -011RO

Liabilities Subject to Mandatory Reserve in Lebanese Lira

Average between _______________ and_______________

Bank Name: Number: (In thousands of Lebanese Lira)

Liabilities Number Name

Demand Liabilities

Total

20100 Other non-resident issuing institutions 20180 Less: Accrued but unpaid interest - non-resident 20200 Non-resident commercial banks 20250 Less: Credit accounts for debtor accounts - non-resident 20280 Less: Accrued but unpaid interest - non-resident 20300 Resident and non-resident medium and long-term credit institutions 20370 Less: Credit accounts for debtor accounts 20380 Less: Accrued but unpaid interest 20500 Resident and non-resident registered financial institutions 20560 Less: Credit accounts for debtor accounts 20580 Less: Accrued but unpaid interest 23900 Other resident and non-resident financial sector institutions 23960 Less: Credit accounts for debtor accounts 23980 Less: Accrued but unpaid interest Z20800 Customer deposits resident and non-resident (1) 20871 Less: Documentary credits for import 20890 Less: Credit accounts for debtor accounts 20895 Less: Accrued but unpaid interest 24300 Deposits originated by credit contracts resident and non-resident 24301 Less: Accrued but unpaid interest 20900 Public sector deposits 20980 Less: Accrued but unpaid interest 21000 Payment values resident and non-resident 21210 Various creditors - resident and non-resident private sector 21221 Various creditors - public sector demand accounts 21225 Cash guarantees for electronic operations 21300 Partners resident and non-resident 21325 Less: Accrued but unpaid interest 21330 Less: Cash advances earmarked to cover inventory shortages 21350 Less: Deposits earmarked to increase own funds 21700 Debt securities and equivalents resident and non-resident Less: Accrued but unpaid interest at fair value against profit and loss account 21748 21755 Less: Accrued but unpaid interest classified at amortized cost 23000 Branches abroad 23050 Less: Credit accounts for debtor accounts 23080 Less: Accrued but unpaid interest 23100Z Head office, parent institution, resident and non-resident sister and subsidiary banks and financial institutions (excluding resident commercial banks)

23150 Less: Credit accounts for debtor accounts 23180 Less: Accrued but unpaid interest Z24600 Bank certificates at fair value against profit and loss account resident and non-resident (excluding those sold to resident commercial banks) 24680 Less: Accrued but unpaid interest Z24700 Bank certificates at amortized cost resident and non-resident (excluding those sold to resident commercial banks) 24780 Less: Accrued but unpaid interest 99999 Total liabilities in thousands of Lebanese Lira

(1) Excluding accounts of the Housing Savings/Borrowing Program and deposits of the Volunteer Military Housing Device which were previously benefited from before October 20, 2017 Circular No. 475 dated October 19, 2017

Central Bank of Lebanon Form No. (2/5) -011RO

Bank Name: ___________________________ Number: ______________

Status as of Wednesday at: _____________

Of Total Liabilities (In thousands of Lebanese Lira)

Permitted Reductions from Total Liabilities in Lira

-a Medium and long-term loan balances :“1 Medium and long-term loans for productive sectors not mentioned below - Code a :“2 Housing loans - Code a :“3 Loans benefiting from interest subsidies not mentioned below - Code a :“3 Loans benefiting from interest subsidies and converted to US Dollars not mentioned below - Code xa

:“31 Loans granted based on the agreement signed between the Lebanese Republic and the European Investment Bank and benefiting from interest subsidies - Code a :“32 Loans granted with financing from AFESD, AFD, OPIC, EIB, IFC and benefiting from interest subsidies - Code a :“33 Loans granted in foreign currency against guarantee from AFESD, AFD, OPIC, EIB, IFC and benefiting from interest subsidies - Code a :“34 Loans earmarked to finance working capital needs of tourist institutions and benefiting from interest subsidies - Code a :“0 Loans for productive sectors that have entered the extended repayment period and no longer benefit from interest subsidies - Code a :“4 Loans granted in foreign currency against guarantee from Kafalat company and benefiting from interest subsidies - Code a :“5 Loans granted in foreign currency against guarantee from Kafalat company and benefiting from interest subsidies - Code a :“8 Loans granted with financing from AFESD, AFD, OPIC, EIB, IFC and benefiting from interest subsidies - Code a :“9 Loans granted in foreign currency against guarantee from AFESD, AFD, OPIC, EIB, IFC and benefiting from interest subsidies - Code a

-b Debt securities and debt instruments :“1 Securities approved by the Central Bank of Lebanon, up to 80% of the purchase price - Code b :“2 Foreign currency debt instruments purchased and lending granted to financial institutions and collective investment bodies for the exclusive purpose of using them to purchase foreign currency debt instruments ⇒ Code “21b: Public sector debt instruments and related lending ⇒ Code “22b: Private sector debt instruments and related lending :“3 Private sector issued debt securities benefiting from incentives - Code b

Total balances of loans, bonds, and instruments benefiting from total liability reduction equal to (a + b)

Central Bank of Lebanon Form No. (3/5) -011RO

Bank Name: ___________________________ Number: ______________

Status as of Wednesday at: _____________

Of Total Liabilities (In thousands of Lebanese Lira)

Permitted Reductions from Total Liabilities in Lira

-c Loans benefiting from total liability reduction equal to 200% of their balances :“19 Balances of loans granted in foreign currency for productive sectors not mentioned below and benefiting from 2009 incentives - Code a :“29 Balances of housing loans granted in foreign currency benefiting from 2009 incentives - Code a :“49 Balances of loans granted in foreign currency against guarantee from Kafalat company not benefiting from interest subsidies and benefiting from 2009 incentives - Code a :“89 Balances of loans granted with financing from AFESD, AFD, OPIC, EIB, IFC not benefiting from interest subsidies and benefiting from 2009 incentives - Code a :“99 Balances of loans granted in foreign currency against guarantee from AFESD, AFD, OPIC, EIB, IFC not benefiting from interest subsidies and benefiting from 2009 incentives - Code a :“09 Other loans granted in foreign currency benefiting from 2009 incentives - Code v

(c) Total balances of loans benefiting from total liability reduction equal to 200% of their balances

-d Loans benefiting from total liability reduction equal to 400% of their balances :“35 Loans granted to finance environmental projects benefiting from interest subsidies - Code a :“35 Loans granted to finance environmental projects benefiting from interest subsidies converted to US Dollars - Code x

Total balances of loans benefiting from total liability reduction equal to (d) 400% of their balances

-e Loans benefiting from total liability reduction equal to 500% of their balances

:“11 Loans granted in foreign currency to finance environmental projects in non-energy sectors benefiting from interest subsidies - Code a :“12 Loans granted in foreign currency to finance environmental projects in the energy sector benefiting from interest subsidies - Code a

Total balances of loans benefiting from total liability reduction equal to (e) 500% of their balances

-w Loans benefiting from total liability reduction equal to 600% of their balances

:“13 Loans granted to finance environmental projects after the end of the interest subsidy period - Code a

Total balances of loans benefiting from total liability reduction equal to (w) 600% of their balances

(a + b) + (c x 2) (d + x) e + )4 x( 5 w( + x( 6 Total reductions from total liabilities

Central Bank of Lebanon Form No. (4/5) -011RO Bank Name: ___________________________ Number: ______________

Status as of Wednesday at: _____________

Permitted Incentives from Mandatory Reserve (1) in thousands of Lebanese Lira

-z Balances of loans not benefiting from 2009 incentives ♦ Code: “p Housing loans granted in Lira based on the protocol signed with the Public Establishment for Housing before 8/2/2017 ♦ Code: “07p Housing loans granted in Lira based on the protocol signed with the Public Establishment for Housing after 7/2/2017 ♦ Code: “0q Loans granted in Lira within the "Kafalat Ashjar" program after the end of the support period ♦ Code: “1q Loans granted in Lira against guarantee of "Kafalat company" not benefiting from state interest subsidies ♦ Code: “2q Loans granted in Lira against guarantee of "Kafalat company" benefiting from state interest subsidies ♦ Code: “2xq Loans granted in Lira against guarantee of "Kafalat company" benefiting from state interest subsidies converted to US Dollars ♦ Code: “3q Loans granted in Lira to finance environmental projects in the energy sector against guarantee of "Kafalat company" benefiting from state interest subsidies ♦ Code: “r Loans granted in Lira against guarantee from AFESD, AFD, OPIC, EIB, IFC benefiting from interest subsidies ♦ Code: “i Housing loans financed by lending granted in Lira to the Housing Bank ♦ Code: “s Loans granted in Lira directly to the Public Establishment for Housing ♦ Code: “1m Housing loans granted in Lira based on the protocol signed with the "Volunteer Military Housing Device" ♦ Code: “2m Loans granted in Lira directly to the "Volunteer Military Housing Device" ♦ Code: “3m Loans granted by the Volunteer Military Housing Device before 6/2/2009 and transferred to the bank's benefit ♦ Code: “1h Small Lira loans granted with the approval of microfinance institutions ♦ Code: “21h Small Lira loans financed by lending granted to microfinance institutions ♦ Code: “22h Small Lira loans financed by lending granted to financial institutions ♦ Code: “t Loans granted in Lira against guarantee from AFESD, AFD, OPIC, EIB, IFC not benefiting from interest subsidies ♦ Code: “u Loans granted in Lira for continuing studies in higher education institutions ♦ Code: “1ev Loans granted in Lira to finance environmental projects in non-energy sectors not benefiting from interest subsidies ♦ Code: “1xv Loans granted in Lira to finance environmental projects in non-energy sectors not benefiting from interest subsidies converted to US Dollars ♦ Code: “2ev Loans granted in Lira to finance environmental projects in the energy sector not benefiting from interest subsidies ♦ Code: “2xv Loans granted in Lira to finance environmental projects in the energy sector not benefiting from interest subsidies converted to US Dollars ♦ Code: "ag Agricultural loans granted in Lira based on the protocol signed with the Ministry of Agriculture ♦ Code: "dp Housing loans granted in Lira based on the protocol signed with the Ministry of Displaced Persons ♦ Code: "jr Housing loans granted in Lira based on the protocol signed with the Judges' Mutual Aid Fund ♦ Code: “10i Housing loans financed by loans granted to the Housing Bank according to the Central Council Decision No. 16/26/10 dated 11/8/2010 ♦ Code: “fs Housing loans granted in Lira based on the protocol signed with the General Directorate of Internal Security Forces ♦ Code: “sg Housing loans granted in Lira based on the protocol signed with the General Directorate of Public Security ♦ Code: “en Loans granted in Lira to contractors to construct or rehabilitate government buildings ♦ Code: “ict Loans granted in Lira to Lebanese doctors to purchase a tablet computer ♦ Code: “se Housing loans granted in Lira based on the protocol signed with the General Directorate of State Security ♦ Code: “ad Housing loans granted in Lira based on the protocol signed with the Customs Inspectorate ♦ Code: "pp Housing loans granted in Lira based on the cooperation protocol with the Fire Brigade ♦ Code: "pkg Loans granted in Lebanese Lira to build a public parking garage for the purpose of renting car parking spaces ♦ Code: "cma Housing loans granted in Lebanese Lira to employees of the Financial Markets Authority ♦ Code: "gb Housing loans granted in Lebanese Lira based on the cooperation protocol between banks and the Beirut Municipality Guard Brigade ♦ Code: "cca Housing loans granted in Lebanese Lira to users of the Supervisory Committee of Insurance Bodies

Central Bank of Lebanon Form No. (5/5) -011RO Bank Name: ___________________________ Number: ______________

Status as of Wednesday at: _____________

Permitted Incentives from Mandatory Reserve (2) in thousands of Lebanese Lira

-h Balances of loans benefiting from 2009 incentives ♦ Code: “19n Loans granted in Lira for productive sectors not benefiting from state interest subsidies and benefiting from 2009 incentives ♦ Code: “19X Loans granted in Lira for productive sectors not benefiting from state interest subsidies and benefiting from 2009 incentives converted to US Dollars ♦ Code: “29n Housing loans granted in Lira before 8/2/2017 and benefiting from 2009 incentives ♦ Code: “29X Housing loans granted in Lira before 8/2/2017 and benefiting from 2009 incentives converted to US Dollars ♦ Code: “27n Housing loans granted in Lira after 7/2/2017 and benefiting from 2009 incentives ♦ Code: “27X Housing loans granted in Lira after 7/2/2017 and benefiting from 2009 incentives converted to US Dollars ♦ Code: “09n Other loans granted in Lira benefiting from 2009 incentives ♦ Code: “09X Other loans granted in Lira benefiting from 2009 incentives converted to US Dollars ♦ Code: “09i Housing loans benefiting from 2009 incentives financed by lending granted in Lira to the Housing Bank ♦ Code "ce Loans granted in Lebanese Lira to industrial institutions to finance working capital against exports

Note:

• For loan categories not benefiting from 2009 incentives, the following reserve reduction ratios apply: (s+ m1+ m2+ m3+ h1+ h21+ h22+ t+ u+ ag + dp+ jr+ i10+ fs + q0+ q3+ en+ sg +se + ad+ pp + pkg + cma + gb + cca) + 0.6 x (q1+ q2+xq2+ r) + 0.65 x (i) + 0.8 x (p) + 0.9 (p07) + 1.5 x (ev1+xv1+ev2+xv2+ict)

• As for loan categories benefiting from incentives, the following reserve reduction ratios apply: 0.6 x (n19 +n29 +n09+ x19 +x29 +x09) + 0.75 x (n27+ x27) + 0.8 x (i09 ) + (ce)