Exchange Operations at the Banks and Financial Institutions

Intermediary Circular No. 675

To Banks and Financial Institutions

We enclose Intermediary Decision No. 13566 dated July 24, 2023, concerning the amendment of Basic Decision No. 6568 dated April 24, 1997 (Exchange Operations at Banks and Financial Institutions), attached to Basic Circular No. 32.

Beirut, July 24, 2023 Governor of the Central Bank of Lebanon Riad T. Salam

Intermediary Decision No. 13566 Amendment of Basic Decision No. 6568 dated April 24, 1997

The Governor of the Central Bank of Lebanon, Based on the Monetary and Banking Law, particularly Articles 174 and 70 thereof, Based on Basic Decision No. 6568 dated April 24, 1997, and its amendments concerning exchange operations at banks and financial institutions, And based on the decision of the Central Council of the Central Bank of Lebanon taken in its meeting held on July 5, 2023,

Decides as follows:

Article One: The text of paragraph (1) of "Article 1" of Basic Decision No. 6568 dated April 24, 1997 is repealed and replaced with the following text: « 1- Open Position in each foreign currency separately: (POSITION OUVERTE - OPEN POSITION) It is the net long (Position Long) or short (Position Short) position representing the sum of the following:

• a. On-balance sheet open position: Foreign currency assets (Assets FC) within the balance sheet that are affected by exchange rate changes based on international financial reporting standards, minus foreign currency liabilities (Liabilities FC) within the balance sheet that are affected by exchange rate changes based on international financial reporting standards. b. Off-balance sheet open position: Amounts to be received minus amounts to be delivered resulting from financial derivatives operations linked to currencies. »

Article Two (temporarily suspended): Banks are permitted to request the establishment of new fixed or structural exchange positions, or their increase, or the modification of the currencies constituting them.

Article Three: The text of "Article 8" of Basic Decision No. 6568 dated April 24, 1997 is repealed and replaced with the following text: « 1- Banks exceeding the specified limit for net open position (1%) must deposit a special Lebanese Pound reserve at the Central Bank of Lebanon amounting to ten times the excess, based on the published exchange rate on the electronic foreign exchange platform "Sayrafa", for one month per day of excess. They must also, when exceeding the specified limit for total open position (40%), deposit a special reserve at the Central Bank of Lebanon equivalent to ten times this excess in US Dollars on the date it occurs, after deducting its value from the net open position, for one month per day of excess. 2- Financial institutions exceeding the specified limit for net long open position (100%) or short (5%) must deposit a special Lebanese Pound reserve at the Central Bank of Lebanon amounting to ten times the excess, based on the published exchange rate on the electronic foreign exchange platform "Sayrafa", for one month per day of excess. »

Article Four: The following text is added to Basic Decision No. 6568 dated April 24, 1997 as Article 9 bis: « Article 9 bis: Banks are granted a maximum deadline of August 31, 2023 to settle excesses in open positions, such that settlement is based on the exchange rate used in Central Bank of Lebanon transactions with banks at the date of issuance of this decision, and such that the provisions of Article 8 of this decision apply after the expiration of this deadline. Banks unable to settle their status within the specified above period may consult the Central Council regarding this matter before the end of this deadline. The provisions of this article do not apply to the long open position resulting from the revaluation of real estate under Articles 153 and 154 of the Monetary and Banking Law, and equity participations subject to the provisions of these articles in affiliated units classified under the Equity Method (Method Equity) and recorded in foreign currencies. In addition to applying the provisions of Article 8 and Article 9 of this decision, a bank that does not comply with the provisions of this article is subject to referral to the Higher Banking Authority. »

Article Five: This decision takes effect upon its issuance and applies to pending situations as of June 30, 2023.

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

Beirut, July 24, 2023 Governor of the Central Bank of Lebanon Riad T. Salam

1 - The application of this article was suspended by Intermediary Decision No. 13578 dated September 11, 2023 (Intermediary Circular No. 677).