Central Bank of Lebanon Circular No. 530: Amendment of Decision No. 7144 on Documentary Credits

Circular No. 530

For Banks

We refer you to Central Bank Decision No. 13113 dated 30/9/2019 concerning the amendment of the basic Decision No. 7144 dated 30/10/1998 (Documentary Credits and Letters of Credit) attached to Circular No. 52.

Beirut, September 30, 2019

Governor of the Central Bank of Lebanon

Riad T. Salamé

Central Bank Decision No. 13113

Amendment of Basic Decision No. 7144 dated 30/10/1998 Concerning Documentary Credits and Letters of Credit

The Governor of the Central Bank of Lebanon,

Pursuant to the Monetary and Loan Law, particularly Article 146 thereof, Pursuant to Basic Decision No. 7144 dated 30/10/1998 and its amendments concerning Documentary Credits and Letters of Credit, Pursuant to the powers vested in the Governor to ensure the operation of the Central Bank based on the principle of continuity of public service,

Decides as follows:

Article One: Article 1 bis is added to Basic Decision No. 7144 dated 30/10/1998 with the following text:

"1. Banks that open documentary credits exclusively for the import of petroleum derivatives (gasoline, fuel oil, gas) or wheat and medicines may request from the Central Bank of Lebanon to secure the value of these credits in US dollars, provided they comply with the following:

• A. They must open special accounts at the Central Bank of Lebanon for each transaction subject to the documentary credits.
• B. They must submit to the Central Bank of Lebanon a copy of the documents related to each documentary credit, particularly the text of the documentary credit and the financing agreement signed between the concerned bank and its client for this purpose.
• C. They must deposit in each special account and for each documentary credit separately, on the date of opening the credit:
  • At least 15% of the value of the requested documentary credit in US dollars.
  • 100% of the value of the requested documentary credit in Lebanese Lira, provided that the concerned bank may, on the date of depositing this value, request the Central Bank of Lebanon to convert the equivalent of this value into US dollars in the special account where it is deposited for a period not exceeding thirty days, until the maturity date indicated in the financing agreements signed with each client or until the maturity date of the bank certificates, whichever is later.
• D. They must pay to the Central Bank of Lebanon a commission of 0.5% for each transaction.

This article is exclusively dedicated to importing the goods mentioned above to cover their local consumption. Banks must ensure, under their full responsibility, that the documentary credits covered by this article are not used for local consumption.

2. The Central Bank of Lebanon pays interest on the amounts specified in paragraph (C) of item (1) above, deposited in the special accounts, according to the interest table in effect at the Central Bank of Lebanon.

3. The Central Bank of Lebanon secures the value of the documentary credits subject to this article in US dollars on the maturity date, and no early repayment agreed upon between the bank and the client shall be considered against the Central Bank of Lebanon.
   The bank must submit to the Central Bank of Lebanon the documents proving the client's fulfillment of obligations according to the financing agreements mentioned above.

4. Requests from banks subject to this article are submitted to the Foreign Exchange and External Operations Directorate at the Central Bank of Lebanon.

5. Banks must ensure, under their responsibility, the proper application of the conditions stipulated in this article and the purpose for which it was established, under penalty of the Central Bank of Lebanon taking appropriate measures, particularly obliging the violating bank to deposit a special reserve without interest at the Central Bank of Lebanon, equivalent to the value of the amounts specified in paragraph (C) of item (1) above."

Article Two: This Decision shall be enforced upon its issuance.

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

Beirut, September 30, 2019
Governor of the Central Bank of Lebanon

Riad T. Salamé