Central Bank of Lebanon Circular No. 13222 Amending Basic Decision No. 6116 Regarding Exceptional Facilities for Banks and Financial Institutions

Circular No. 552

For Banks and Financial Institutions

We enclose for your reference Basic Decision No. 13222 dated 22/4/2020 regarding the amendment of Basic Decision No. 6116 dated 7/3/1996 (Facilities that may be granted by the Central Bank of Lebanon to banks and financial institutions), attached to Basic Circular No. 23.

Beirut, April 22, 2020

Governor of the Central Bank of Lebanon

Riad T. Salam

Basic Decision No. 13222

Amending Basic Decision No. 6116 dated 7/3/1996

The Governor of the Central Bank of Lebanon,

Pursuant to the Monetary and Banking Law, particularly Articles 174, 70, and 79 thereof,

And pursuant to Basic Decision No. 6116 dated 7/3/1996 and its amendments regarding the facilities that may be granted by the Central Bank of Lebanon to banks and financial institutions,

And clarifying the general framework stipulated in "Article 14 bis" of Basic Decision No. 6116 dated 7/3/1996 mentioned above,

And facilitating the handling of special cases presented to banks and financial institutions,

And unifying the standards to be adopted by the concerned parties to avoid any arbitrariness,

And addressing the exceptional situation the country is going through, which necessitates covering the obligations of the month of June 2020 as well, in light of the potential continuation of the current situation,

And subjecting them to the principles of "Article 14 bis" mentioned above,

And relying on the principles of continuity of public service,

And relying on the powers vested in the Governor to ensure the operation of the Central Bank of Lebanon based on the general public interest,

Decides as follows:

Article One: Detailed conditions and additional clarifications are added to "Article 14 bis" of Basic Decision No. 6116 dated 7/3/1996, so that its text becomes as follows:

"Article 14 bis: First, banks and financial institutions operating in Lebanon shall grant, at their own responsibility, exceptional loans in Lebanese Lira or US Dollars to their clients who benefit from loans of any kind previously granted by the relevant bank or financial institution, including those benefiting from state interest support or mandatory reserve reduction for them, or from the rulings of "Article 9 bis", "Article 10", "Article 11", and "Article 11 bis" of this Decision, and who are unable to settle their obligations for four months (March, April, May, and June 2020) due to the current circumstances.

This is subject to the following conditions:

1. The loans must be exceptional and granted for the following purposes:
   a) Settlement of installments of previously granted loans due for the months mentioned above. b) Payment of salaries and wages for employees of the concerned clients, or covering production or operational needs during the period mentioned above, provided that the client is an institution or company.

2. Banks and financial institutions must ensure, at their own responsibility, the need of the concerned client to cover these obligations.

3. These loans must be granted regardless of the ceilings determined for each client.

4. No commission or interest shall be charged on these loans (i.e., at an interest rate of zero percent (0%)).

5. These loans must be repaid within a period of five years in installments due monthly or quarterly, according to what is specified in the contract signed between the relevant bank or financial institution and the client, with the first installment due on June 30, 2020, or at the end of the month following the month in which the exceptional loan was granted, whichever is later.

The exceptional loan granted to the client shall be repaid in the currency of that loan. The client may agree with the bank or financial institution to:
a) Repay the exceptional loan within a period shorter than the five years specified above; b) Make an early repayment (Prepayment) of the exceptional loan without any fees or commissions.

6. The relevant banks or financial institutions shall pay the salaries, subject to paragraph (b) of item (1) of this section, directly to the employees and workers of the concerned clients according to the salary lists provided to them by these clients.

Cash can be paid by the bank or financial institution to the employee, or by bank transfer to their account in other banks operating in Lebanon, or through a settlement account opened for them at the relevant bank for this purpose, or by debit card (Debit Cards), without imposing any commission or other cost on the employee.

7. As a result of the current exceptional economic circumstances, the client's financial situation has been negatively affected, leading to their inability to settle their obligations to pay loan installments and/or pay salaries to employees or workers and/or cover operational needs (such as rent, electricity, water, and telephone bills...), and raw materials for the mentioned months.

8. To estimate whether there are no other sufficient repayment sources available for the client to use, according to the bank or financial institution (such as the existence of sufficient credit accounts deposited with the relevant bank or the existence of cash collateral (Collateral Cash) that allows the conditions governing them to settle loan installments from them, or the high probability of collecting installments from students if the client is an educational institution...).

9. Institutions and companies that have completely closed their doors shall not benefit from these loans except to pay the salaries of their employees and workers, loan installments, and the operational needs mentioned in item (7) above, excluding raw materials.

10. The client shall not belong to sectors that were not covered by the closure order (for example, pharmacies are not under lockdown, grocery stores, food retail outlets...). However, in some exceptional cases, and if it appears to the bank or financial institution, at their own responsibility, that the current economic circumstances prevented these clients from settling their obligations for the mentioned months, the bank or financial institution may approve their benefit from the exceptional loans subject to this Article.

11. The client shall not be an employee in an institution or company that obtained an exceptional loan under other rulings to pay the salaries of employees and workers under the provisions of this Article.

12. As of February 29, 2020, the client shall be classified into one of the following supervisory classification (Classification Supervisory) categories:

• Normal.
• Under monitoring.
• Under monitoring and settlement.

13. The exceptional loans shall be granted according to the maximum limits indicated in the table (02FEL), provided that the client may benefit from one or more exceptional loans for several purposes within the maximum limits indicated in the mentioned table.

14. The total amount of exceptional loans granted to the client from all banks and financial institutions shall not exceed the maximum limits indicated in the table (02FEL), provided that the client shall provide these institutions with the manner in which they distribute their financing needs to each bank and/or financial institution they deal with as a debtor.

Second: The client may, despite not benefiting from previously granted loans or facilities from the bank or financial institution, benefit from the exceptional loans mentioned in the "First" section of this Article if these banks and financial institutions determine, at their full responsibility, that the client's financial situation has been negatively affected due to the current exceptional economic circumstances, and this according to the same conditions specified in this Article.

Third: The Central Bank of Lebanon shall grant the relevant banks and financial institutions US Dollar loans at an interest rate of zero percent (0%) for a period of five years, equal in value to the exceptional loans granted in Lebanese Lira or US Dollars according to the provisions of this Article, immediately upon submission of complete applications.

Fourth: To benefit from the provisions of this Article, banks and financial institutions shall submit, starting from March 26, 2020, and within a deadline of June 30, 2020, to the Financial Operations Department at the Central Bank of Lebanon, requests for overall approval for the loans they grant under the provisions of this Article, specifying the total amounts to be granted, accompanied by a table listing the names of the benefiting clients according to model (01FEL) attached, and the value of the loans granted to each of them.

Banks and financial institutions may pay these exceptional loans to their clients before obtaining the approval of the Central Bank of Lebanon mentioned in this paragraph.

Fifth: The relevant banks and financial institutions shall keep all documents granted under the provisions of this Article, such that the Banking Supervision Committee can review them at any time. These documents shall include the loan contracts signed with clients and repayment schedules.

Sixth: Banks and financial institutions shall:
a) Not register penalty interest or fines on obligations due and not settled during the months specified in the "First" section of this Article. b) Not consider the exceptional loans granted to clients according to this Article as debt restructuring requiring a change in the client's current classification.

Seventh: To calculate the value of the loans granted by the Central Bank of Lebanon, the average exchange rate of the currency of the loan granted to the client in Lebanese Lira shall be adopted as of the date of the Central Bank of Lebanon's approval of the request of the relevant bank or financial institution.

Eighth: The loans granted by the Central Bank of Lebanon to banks and financial institutions shall be repaid within the maturity period of the loans granted by these latter according to the provisions of this Article, in monthly installments, with the first installment due at the end of the month following the month in which the Central Bank of Lebanon's approval was issued or on June 30, 2020, whichever is later.

Ninth-1: The exchange rate difference resulting from granting exceptional loans in Lebanese Lira under this Article shall be considered as financing obtained by banks and financial institutions from the Central Bank of Lebanon in US Dollars as a special exchange rate difference, deducted when calculating the maximum limits for net and gross operational exchange rate differences.

Ninth-2: The exceptional loans granted by banks and financial institutions in Lebanese Lira under this Article shall be included in calculating the 25% rate specified in Article 1 bis of Basic Decision No. 7776 dated 21/2/2001.

Tenth: Each bank or financial institution shall bear the responsibility for the correctness and proper implementation of this Article. The relevant bank or financial institution shall be liable to repay the value of the loans granted by the Central Bank of Lebanon against each loan granted in violation of the provisions of this Article, and to pay compensation equivalent to a penalty clause of 15% of the loan value, deposited as a special reserve at the Central Bank of Lebanon, which shall not generate interest equal to double the value of the mentioned loans against this loan for a period equal to the duration in which the Central Bank of Lebanon's loans were benefited from, all without prejudice to the administrative penalties stipulated in Article 208 of the Monetary and Banking Law.

Eleventh: The Compliance Department and the Internal Audit Unit of each bank or financial institution shall assess the extent to which the latter complies with the requirements of this Article and prepare periodic reports (monthly at least, and whenever necessary) on this matter, which shall be submitted to the Executive Senior Management. These reports shall be available to the inspectors of the Banking Supervision Committee upon their first request.

Twelfth: Banks and financial institutions shall declare to the Supervisory Committee the exceptional loans granted based on this Article monthly according to the model they prepare for this purpose.

Thirteenth: The Banking Supervision Committee shall ensure the proper implementation of the provisions of this Article, particularly verifying the documents related to these loans.

Article Two: The "Table of Exceptional Loans" attached to Basic Decision No. 6116 dated 7/3/1996 is repealed and replaced by the attached table (01FEL).

Article Three: This Decision shall be implemented upon its issuance.

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

Beirut, April 22, 2020

Governor of the Central Bank of Lebanon

Riad T. Salam

Central Bank of Lebanon – Financial Operations Department FEL01
Table Attached to the Request to Benefit from Exceptional Loans Based on Article 14 bis of Basic Decision No. 6116 dated 7/3/1996

Bank/Financial Institution Name: Request Date:
Central Bank of Lebanon Registry Number: Request Number:
Central Bank of Lebanon Approval Date:

Client Information | Information on the Exceptional Loan Granted to the Client | Information on the Exceptional Loan Granted by the Central Bank of Lebanon to the Bank

Exceptional Loan Code | Client Type (1) | Nature of Risk | Central Bank Number | Client Name | Loan Currency | Loan Value | Obligation Value | Repayment Frequency | Agreed Date with Debtor for First Installment | Agreed Date with Debtor for Last Installment | Total Loan | Loan Currency | Loan Grant Date | First Installment Payment Date | Last Installment Payment Date

(1) Determine the nature of the client from the following options: (1) Retail; (2) Small and Medium Enterprise (SME), Company (Corporate). Individual institutions are considered Small and Medium Enterprises.
(2) Determine the code of the exceptional loan type from the following options:
1fe: Settlement of due obligations
2fe: Salary payment
3fe: Covering operational expenses
4fe: Covering production needs or working capital (excluding salaries, operational expenses, and loan obligations).
(3) Determine the repayment frequency from the following: (1) Monthly, (2) Quarterly.

FEL 02
Table for Determining the Value of the Exceptional Loan According to Its Purpose

Purpose of Loan Use	Value of Loan
Settlement of Due Obligations Exclusively	• The value of the possible exceptional loan granted shall equal the value of the due obligations for the months specified in "Article 14 bis" of this Decision.

• If the purpose of the exceptional loan is to settle loan installments and credit card payments, the exceptional loan shall equal the value of the minimum payment (Minimum Payment) during the mentioned months.
• If the client benefits from a loan with an annual, semi-annual, or quarterly installment due in the mentioned months, the value of the possible exceptional loan granted shall equal one-third of the annual installment value, two-thirds of the semi-annual installment value, or 100% of the quarterly installment value.
  Salary Payment Exclusively | • The value of the possible exceptional loan granted shall equal the value of the salaries due for the months specified in "Article 14 bis" of this Decision, with a maximum limit of one-third of the verified annual salary value (if available) for the year 2019. Covering Other Operational Expenses Exclusively (Rent, electricity, water, and telephone bills...)| • The value of the exceptional loan for these other operational expenses to be settled for the months specified in "Article 14 bis" of this Decision shall equal the lesser of the following values:
• These operational expenses for the first four months of 2020 (i.e., January, February, March, and April);
• One-third of these annual operational expenses verified (if available) for the year 2019.
  Covering Production Needs and Working Capital Needs, Including Documentary Credits Due Exclusively (excluding salaries, other operational expenses, and loan obligations) | • The value of the possible exceptional loan granted to cover these needs for the months specified in "Article 14 bis" of this Decision shall equal the lesser of the following values:
• Cost of Goods Sold for the first four months of 2020 (i.e., January, February, March, and April);
• One-third of the verified Cost of Goods Sold (if available) for the year 2019.