Intermediary Circular No. 670 Amending Basic Decisions on Mandatory Reserve Requirements for Banks and Islamic Banks

Intermediary Circular No. 670

To Banks

We transmit to you a copy of Intermediary Decision No. 13556 dated 19/6/2023 amending:

• Basic Decision No. 7835 dated 2/6/2001 (Mandatory Reserve) attached to Basic Circular No. 84
• Basic Decision No. 9763 dated 9/11/2007 (Cash Mandatory Reserve, Minimum Special Reserve for Islamic Banks and their Mandatory Investments) attached to Basic Circular No. 113.

Beirut, 19 June 2023

Governor of Banque du Liban

Riad T. Salamah

Intermediary Decision No. 13556

Amending Basic Decision No. 7835 dated 2/6/2001 and Basic Decision No. 9763 dated 9/11/2007

The Governor of Banque du Liban, Pursuant to the Monetary and Discount Law, particularly Articles 70 and 174 thereof, Pursuant to Basic Decision No. 7835 dated 2/6/2001 and its amendments concerning the Mandatory Reserve, Pursuant to Basic Decision No. 9763 dated 9/11/2007 and its amendments concerning the Cash Mandatory Reserve, the Minimum Special Reserve for Islamic Banks, and their Mandatory Investments, Pursuant to the decision of the Central Council of Banque du Liban taken at its meeting held on 14/6/2023, Decides as follows:

Article One: The text of Article One of Basic Decision No. 7835 dated 2/6/2001 is repealed and replaced with the following text: « Determination of Liabilities Subject to Mandatory Reserve: Liabilities subject to mandatory reserve are determined in Lebanese Lira based on monthly positions, distributed between demand liabilities and time liabilities, according to Table 011RO (attached) including funds deposited or to be deposited in new Lebanese Lira accounts subject to "Article 1" of Basic Decision No. 13548 dated 19/4/2023 ».

Article Two: The text of paragraph 4( ) of Article Four of Basic Decision No. 7835 dated 2/6/2001 is repealed and replaced with the following text:

• 4« For the purpose of calculating the mandatory reserve ratio:
• a) The balances of current accounts opened in Lebanese Lira before 19/4/2023 and the balances of new Lebanese Lira accounts subject to Basic Decision No. 13548 dated 19/4/2023 shall be included in the daily cash balances of banks at Banque du Liban. b) The following shall be included in the daily cash balances of banks at Banque du Liban:
• Balances of accounts designated for US Dollar purchase operations from the Foreign Exchange Unit on behalf of customers.
• Balances of time accounts and pooled accounts for capital increases. »

Article Three: The text of Form 1/5-011RO (attached to Basic Decision No. 7835 dated 2/6/2001) is repealed and replaced with the new text attached to this Decision.

Article Four: The text of Form 2/5-011RO (attached to Basic Decision No. 9763 dated 9/11/2007) is repealed and replaced with the new text attached to this Decision.

Article Five: This Decision shall be effective for the period extending from Thursday, 15 June 2023 to Wednesday, 21 June 2023.

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

Beirut, 19 June 2023

Governor of Banque du Liban

Riad T. Salamah

Banque du Liban Statistics and Economic Research Directorate Form No.: 1/5-011RO Liabilities in Lebanese Lira Subject to Mandatory Reserve Average between _______________ and _______________ Bank Name: _______________ No.: _______________ (In thousands of Lebanese Lira)

Liabilities | Code | Name Demand Liabilities | | Liabilities for Time | | 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 lending 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 | Resident and non-resident other financial sector institutions | 23960 | Less: Credit accounts for debtor accounts | 23980 | Less: Accrued but unpaid interest | Z20800 | Customer deposits (resident and non-resident) (1) | Y20800 | Less: thereof cash-to-cash exchange accounts subject to Basic Circular 157 | P20800 | Less: thereof exchange accounts (public sector salary receivables) | 20871 | Less: Guarantees for documentary credits for imports | 20890 | Less: Credit accounts for debtor accounts | 20895 | Less: Accrued but unpaid interest | 24300 | Deposits originating from credit contracts (resident and non-resident) | 24301 | Less: Accrued but unpaid interest | 20900 | Public sector deposits | 20980 | Less: Accrued but unpaid interest | 21000 | Values for payment (resident and non-resident) | 21210 | Various creditors - resident and non-resident private sector | 21221 | Various creditors - public sector demand accounts | 21300 | Partners (resident and non-resident) | 21325 | Less: Accrued but unpaid interest | 21330 | Less: Cash advances designated to cover inventory shortages | 21350 | Less: Deposits designated for capital increases | 21700 | Bonds and similar debt instruments (resident and non-resident) | 21748 | Less: Accrued but unpaid interest at fair value against profit and loss account | 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 | Z23100 | Head office, parent institution, sister and affiliated banks and financial institutions, resident and non-resident (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 under the Housing Savings/Loan Program and deposits of the Volunteer Military Housing Device which were previously utilized before 20/10/2017 per Intermediary Circular 475 dated 19 October 2017.

Banque du Liban Form No.: 2/5-011RO

Bank Name: _______________ No.: _______________

Position as of Wednesday at: _______________ Time Liabilities (In thousands of Lebanese Lira) Allowed Deductions from Time Liabilities in Lira

• a) Balances of medium and long-term loans
• Code: “1a” Medium and long-term loans to productive sectors not listed below
• Code: “2a” Housing loans
• Code: “3a” Loans benefiting from interest subsidies not listed below
• Code: “3xa” Loans benefiting from interest subsidies and converted to US Dollar not listed below
• Code: “31a” Loans granted based on the agreement between the Lebanese Republic and the European Bank for Reconstruction and Development for Investment and benefiting from interest subsidies
• Code: “32a” Loans granted with financing from AFESD, AFD, OPIC, EIB, IFC and benefiting from interest subsidies
• Code: “33a” Loans granted in foreign currencies for guarantees from AFESD, AFD, OPIC, EIB, IFC and benefiting from interest subsidies
• Code: “34a” Loans designated to finance working capital needs of tourism institutions and benefiting from interest subsidies
• Code: “0a” Loans to productive sectors that have entered the extended repayment period and do not benefit from interest subsidies.
• Code: “4a” Loans granted in foreign currencies for guarantees from a guarantee company and not benefiting from interest subsidies.
• Code: “5a” Loans granted in foreign currencies for guarantees from a guarantee company and benefiting from interest subsidies
• Code: “8a” Loans granted with financing from AFESD, AFD, OPIC, EIB, IFC and not benefiting from interest subsidies
• Code: “9a” Loans granted in foreign currencies for guarantees from AFESD, AFD, OPIC, EIB, IFC and not benefiting from interest subsidies
• b) Debt securities and debt instruments
• Code: “1b” Bonds approved by Banque du Liban, up to the purchase price
• Code: “2b” Foreign currency debt instruments purchased and loans granted to financial institutions and collective investment bodies for the exclusive purpose of purchasing foreign currency debt instruments ⇒ Code: “21b” Public sector debt instruments and related loans ⇒ Code: “22” Private sector debt instruments and related loans
• Code: “3b” Private sector debt securities benefiting from deductions Total balances of loans, bonds, and instruments benefiting from time liability deductions equivalent to (a + b)

Banque du Liban Form No.: 3/5-011RO

Bank Name: _______________ No.: _______________

Position as of Wednesday at: _______________ Time Liabilities (In thousands of Lebanese Lira) Allowed Deductions from Time Liabilities in Lira c) Loans benefiting from time liability deductions equivalent to 200% of their balances

• Code: “19a” Balances of loans granted in foreign currencies to productive sectors not listed below and benefiting from 2009 incentives
• Code: “29a” Balances of housing loans granted in foreign currencies benefiting from 2009 incentives
• Code: “49a” Balances of loans granted in foreign currencies for guarantees from a guarantee company not benefiting from interest subsidies and benefiting from 2009 incentives
• Code: “89a” Balances of loans granted with financing from AFESD, AFD, OPIC, EIB, IFC not benefiting from interest subsidies and benefiting from 2009 incentives
• Code: “99a” Balances of loans granted in foreign currencies for guarantees from AFESD, AFD, OPIC, EIB, IFC not benefiting from interest subsidies and benefiting from 2009 incentives
• Code: “09v” Balances of other loans granted in foreign currencies benefiting from 2009 incentives Total balances of loans benefiting from time liability deductions equivalent to 200% of (c) their balances d) Loans benefiting from time liability deductions equivalent to 400% of their balances
• Code: “35a” Loans granted to finance environmentally friendly projects benefiting from interest subsidies
• Code: “35x” Loans granted to finance environmentally friendly projects benefiting from interest subsidies converted to US Dollar Total balances of loans benefiting from time liability deductions equivalent to 400% of (d) their balances e) Loans benefiting from time liability deductions equivalent to 500% of their balances
• Code: “11a” Loans granted in foreign currencies to finance environmentally friendly projects outside the energy sector not benefiting from interest subsidies
• Code: “12a” Loans granted in foreign currencies to finance environmentally friendly projects in the energy sector not benefiting from interest subsidies Total balances of loans benefiting from time liability deductions equivalent to 500% of (e) their balances f) Loans benefiting from time liability deductions equivalent to 600% of their balances
• Code: “13a” Loans granted to finance environmentally friendly projects after the expiration of the interest subsidy period Total balances of loans benefiting from time liability deductions equivalent to 600% of (f) their balances

Total Deductions from Time Liabilities = (a + b) + (c) x 2 + (d) x 4 + (e) x 5 + (f) x 6

Banque du Liban Form No.: 4/5-011RO

Bank Name: _______________ No.: _______________ Position as of Wednesday at: _______________ Permitted Deductions from Mandatory Reserve (1) (In thousands of Lebanese Lira) g) Balances of loans not benefiting from 2009 incentives

• Code: “p” Housing loans granted in Lira based on the agreement signed with the Public Housing Establishment before 8/2/2017
• Code: “07p” Housing loans granted in Lira based on the agreement signed with the Public Housing Establishment after 7/2/2017
• Code: “0q” Loans granted in Lira under the "Tree Guarantees" program after the expiration of the subsidy period
• Code: “1q” Loans granted in Lira for guarantees from "Kafalat Company" not benefiting from interest subsidies
• Code: “2q” Loans granted in Lira for guarantees from "Kafalat Company" benefiting from interest subsidies
• Code: “2xq” Loans granted in Lira for guarantees from "Kafalat Company" benefiting from interest subsidies converted to US Dollar
• Code: “3q” Loans granted in Lira to finance environmentally friendly projects in the energy sector for guarantees from "Kafalat Company" benefiting from interest subsidies
• Code: “r” Loans granted in Lira for guarantees from AFESD, AFD, OPIC, EIB, IFC benefiting from interest subsidies
• Code: “i” Housing loans financed by loans granted in Lira to the Housing Bank
• Code: “s” Loans granted in Lira directly to the Public Housing Establishment
• Code: “1m” Housing loans granted in Lira based on the agreement 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
• Code: “1h” Small Lira loans granted with approval of microfinance institutions
• Code: “21h” Small Lira loans financed by loans granted to microfinance institutions
• Code: “22h” Small Lira loans financed by loans granted to financial institutions
• Code: “t” Loans granted in Lira for guarantees from AFESD, AFD, OPIC, EIB, IFC not benefiting from interest subsidies
• Code: “u” Loans granted in Lira for higher education studies
• Code: “1ev” Loans granted in Lira to finance environmentally friendly projects outside the energy sector not benefiting from interest subsidies
• Code: “1xv” Loans granted in Lira to finance environmentally friendly projects outside the energy sector not benefiting from interest subsidies converted to US Dollar
• Code: “2ev” Loans granted in Lira to finance environmentally friendly projects in the energy sector not benefiting from interest subsidies
• Code: “2xv” Loans granted in Lira to finance environmentally friendly projects in the energy sector not benefiting from interest subsidies converted to US Dollar
• Code: “ag” Agricultural loans granted in Lira based on the agreement signed with the Ministry of Agriculture
• Code: “dp” Housing loans granted in Lira based on the agreement signed with the Ministry of Displaced Persons
• Code: “jr” Housing loans granted in Lira based on the agreement signed with the Judges' Mutual Aid Fund
• Code: “10i” Housing loans financed by loans granted to the Housing Bank according to Central Council Decision No. 10/26/16 dated 11/8/2010
• Code: “fs” Housing loans granted in Lira based on the agreement signed with the General Directorate of Internal Security Forces
• Code: “sg” Housing loans granted in Lira based on the agreement signed with the General Directorate of General Security
• Code: “en” Loans granted in Lira to contractors for constructing or rehabilitating government buildings
• Code: “ict” Loans granted in Lira to Lebanese students to purchase a tablet computer
• Code: “se” Housing loans granted in Lira based on the agreement signed with the General Directorate of State Security
• Code: “ad” Housing loans granted in Lira based on the agreement signed with the Customs Police
• 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 car parking rentals
• 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 for Insurance Bodies

Banque du Liban Form No.: 5/5-011RO

Bank Name: _______________ No.: _______________ Position as of Wednesday at: _______________ Permitted Deductions from Mandatory Reserve (2) (In thousands of Lebanese Lira) h) Balances of loans benefiting from 2009 incentives

• Code: “19n” Loans granted in Lira to productive sectors not benefiting from interest subsidies and benefiting from 2009 incentives
• Code: “19X” Loans granted in Lira to productive sectors not benefiting from interest subsidies and benefiting from 2009 incentives converted to US Dollar
• 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 Dollar
• 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 Dollar
• Code: “09n” Other loans granted in Lira and benefiting from 2009 incentives
• Code: “09X” Other loans granted in Lira and benefiting from 2009 incentives converted to US Dollar
• Code: “09i” Housing loans benefiting from 2009 incentives financed by loans 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 mandatory reserve deduction 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)
• For loan categories benefiting from 2009 incentives, the following mandatory reserve deduction ratios apply: 0.6 x (n19 + n29 + n09 + x19 + x29 + x09) + 0.75 x (n27 + x27) + 0.8 x (i09) + (ce)

Liabilities of Islamic Banks in Lebanese Lira Subject to Basic Decision No. ____ Bank Name: ____ No.: _________ Form -21RO Average of the week ending //____ Liabilities of Islamic Banks in Lebanese Lira Subject to Cash Mandatory Reserve (In thousands of Lebanese Lira) Account No. in Bank Position Form (Form 3010) | Demand Liabilities | Time Liabilities | Total 201000 | Non-resident issuing institutions | 202000 | Non-resident banks | 203000 | Resident and non-resident medium and long-term lending institutions | 204000 | Branches abroad | 205000 | Parent institution, sister and affiliated companies, resident and non-resident excluding resident commercial banks | 206000 | Public sector accounts | 207000 | Investment accounts - customers - resident and non-resident | y20600 | Less: thereof cash-to-cash exchange accounts subject to Basic Circular 157 | P20600 | Less: thereof exchange accounts (public sector salary receivables) | 207000 | Credit partner accounts resident and non-resident | 207900 | Less: accounts to cover bad debt losses (2) | 209000 | Issued certificates - resident and non-resident | 209800 | Less: accrued but unpaid charges | 211000 | Creditor debts resident and non-resident | 212110 | Various creditors, private sector resident and non-resident | 212300 | Values for payment - resident and non-resident | 299999 | Total Liabilities in thousands of Lebanese Lira |

Lira-denominated Investment Accounts at Islamic Banks Subject to Minimum Special Reserve 322000 | Investment account liabilities designated 999999 | Total Liabilities and Designated Investment Accounts in thousands of Lebanese Lira

(1) This amount represents a portion of the figure in item 202000 (Banks and financial institutions) in Form 3010. (2) Account 207900 is deducted from time liabilities.

Name of Responsible Person:________________________ Signature:_________________ Fax Number: _____________________________________