Discount Rates and Interest Rates on Loans Granted by BDL

Central Bank Circular No. 45
Also addressed to Financial Institutions

We hereby issue, in conjunction with Central Decision No. 6941 dated 25/3/1998, concerning the determination of discount rates and interest rates on Lebanon Central Bank loans.

Beirut, 25 March 1998
Governor of the Central Bank of Lebanon
Riad Tawfiq Salamah
Old Number: 1614

Central Decision No. 6941
Determination of Discount Rates and Interest Rates on Lebanon Central Bank Loans

The Governor of the Central Bank of Lebanon,
Pursuant to the provisions of the Monetary and Credit Law, particularly paragraph 3 of Article 33, paragraph (a) of Article 76, and Article 103 thereof, And based on the resolution adopted by the Central Council in its meeting held on 18/3/1998, Decrees as follows:

Article 1: Discount Rates
First: Commercial Bills Discounting
The discount rate for commercial bills (as stipulated in Article 100 of the Monetary and Credit Law) is determined as follows:

Remaining Maturity	Currency Issued (USD / LBP)
30 days	USD: Interest rate paid by BDL on one-month USD deposits plus a margin determined by BDL.<br>LBP: Interest rate on 45-day certificates of deposit issued by BDL; if none, then 60-day CDs; if neither exists, the actual yield rate of the latest three-month treasury bill issuance, plus a margin determined by BDL.
60 days	USD: Interest rate paid by BDL on two-month USD deposits plus a margin determined by BDL.<br>LBP: Interest rate on 60-day CDs issued by BDL; if none, the actual yield rate of the latest three-month treasury bill issuance, plus a margin determined by BDL.
90 days	USD: Interest rate paid by BDL on three-month USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest three-month treasury bill issuance plus a margin determined by BDL.
180 days	USD: Interest rate paid by BDL on six-month USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest six-month treasury bill issuance plus a margin determined by BDL.

Second: Treasury Bills Discounting
The discount rate for treasury bills (as stipulated in paragraph 1 of Article 105 and Article 108 of the Monetary and Credit Law) is determined as follows:

Remaining Maturity	Currency Issued (USD / LBP)
30 days	USD: Interest rate paid by BDL on one-month USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest three-month treasury bill issuance plus a margin determined by BDL.
60 days	USD: Interest rate paid by BDL on two-month USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest three-month treasury bill issuance plus a margin determined by BDL.
90 days	USD: Interest rate paid by BDL on three-month USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest three-month treasury bill issuance plus a margin determined by BDL.
180 days	USD: Interest rate paid by BDL on six-month USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest six-month treasury bill issuance plus a margin determined by BDL.

Note: In all cases, the discount interest rate on treasury bills must not be less than the original interest rate paid on these bonds plus at least two percentage points (2% or 200 basis points).

Third: Long-Term Treasury Bills Discounting
The discount rate for long-term treasury bills (as stipulated in paragraph 2 of Article 105 of the Monetary and Credit Law) is determined as follows:

Remaining Maturity	Currency Issued (USD / LBP)
< 180 days	USD: Discount rate as specified in "Second" of Article 1.<br>LBP: Discount rate as specified in "Second" of Article 1.
1 year	USD: Interest rate paid by BDL on one-year USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest one-year treasury bill issuance plus a margin determined by BDL.
2 years	USD: Actual yield rate on two-year US treasury bills plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest two-year treasury bill issuance plus a margin determined by BDL.
3 years	USD: Actual yield rate on three-year US treasury bills plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest two-year treasury bill issuance plus a margin determined by BDL (unless the Treasury issues three-year bonds).
4 years	USD: Actual yield rate on four-year US treasury bills plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest two-year treasury bill issuance plus a margin determined by BDL (unless the Treasury issues longer-term or specifically four-year bonds).
5 years	USD: Actual yield rate on five-year US treasury bills plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest two-year treasury bill issuance plus a margin determined by BDL (unless the Treasury issues longer-term or specifically five-year bonds).

Article 2: Interest Rates on Bond Purchases under the Trust Agreement System
First: Commercial Bills
The interest rate on purchasing commercial bills under the trust agreement system (as stipulated in Article 101 of the Monetary and Credit Law) is determined as follows:

Remaining Maturity (Renewable once)	Currency Issued (USD / LBP)
30 days	USD: Interest rate paid by BDL on one-month USD deposits plus a margin determined by BDL.<br>LBP: Interest rate on 45-day CDs issued by BDL; if none, then 60-day CDs; if neither exists, the actual yield rate of the latest three-month treasury bill issuance, plus a margin determined by BDL.

Second: Treasury Bills
The interest rate on purchasing treasury bills under the trust agreement system (as stipulated in Articles 105 and 108 of the Monetary and Credit Law) is determined as follows:

Remaining Maturity	Currency Issued (USD / LBP)
30 days	USD: Interest rate paid by BDL on one-month USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest three-month treasury bill issuance plus a margin determined by BDL.
60 days	USD: Interest rate paid by BDL on two-month USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest three-month treasury bill issuance plus a margin determined by BDL.
90 days	USD: Interest rate paid by BDL on three-month USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest three-month treasury bill issuance plus a margin determined by BDL.
180 days	USD: Interest rate paid by BDL on six-month USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest six-month treasury bill issuance plus a margin determined by BDL.

Article 3: Interest Rates on Loans
First: Loans Secured by Commercial Bills
The interest rate on current account loans (as stipulated in paragraphs 1 and 2 of Article 102 of the Monetary and Credit Law) secured by commercial bills is determined as follows:

Maximum Loan Maturity	Currency Granted (USD / LBP)
1 year (renewable for another year)	USD: Interest rate paid by BDL on one-year USD deposits plus a margin determined by BDL.<br>LBP: 15%

Second: Loans Secured by Gold, Foreign Currencies, or Securities The interest rate on current account loans (as stipulated in paragraph 1 of Article 102) secured by gold, foreign currencies, or securities is determined as follows:

Maximum Loan Maturity	Currency Granted (USD / LBP)
1 year (renewable for another year)	USD: Interest rate paid by BDL on one-year USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest one-year treasury bill issuance plus a margin determined by BDL.

Third: Loans Secured by Treasury Bills
The interest rate on loans (as stipulated in paragraph 2 of Article 105) secured by treasury bills is determined as follows:

Maximum Loan Maturity	Currency Granted (USD / LBP)
1 year (renewable for another year)	USD: Interest rate paid by BDL on one-year USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest one-year treasury bill issuance plus a margin determined by BDL.

Note: In all cases, the interest rate on loans secured by treasury bills must not be less than the original interest rate paid on these bonds plus at least two percentage points (2% or 200 basis points).

Fourth: Exceptional Advances
The interest rate on loans (as stipulated in paragraph 3 of Article 102) is determined on a case-by-case basis.

Article 4: Declared Commission on Each Special Bond Purchase under Article 106 of the Monetary and Credit Law
First: Special Bonds

Remaining Maturity	Currency Issued (USD / LBP)
30 days	USD: Commission equivalent to the interest rate paid by BDL on one-month USD deposits plus a margin determined by BDL.<br>LBP: Commission equivalent to the interest rate on 45-day CDs issued by BDL; if none, then 60-day CDs; if neither exists, the actual yield rate of the latest three-month treasury bill issuance, plus a margin determined by BDL.
60 days	USD: Commission equivalent to the interest rate paid by BDL on 60-day USD deposits plus a margin determined by BDL.<br>LBP: Commission equivalent to the interest rate on 60-day CDs issued by BDL; if none, the actual yield rate of the latest three-month treasury bill issuance, plus a margin determined by BDL.
90 days	USD: Commission equivalent to the interest rate paid by BDL on three-month USD deposits plus a margin determined by BDL.<br>LBP: Commission equivalent to the actual yield rate of the latest three-month treasury bill issuance plus a margin determined by BDL.
180 days	USD: Commission equivalent to the interest rate paid by BDL on six-month USD deposits plus a margin determined by BDL.<br>LBP: Commission equivalent to the actual yield rate of the latest six-month treasury bill issuance plus a margin determined by BDL.

Second: Government Bonds or Bonds Issued with Government Guarantee

Remaining Maturity	Currency Issued (USD / LBP)
30 days	USD: Interest rate paid by BDL on one-month USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest three-month treasury bill issuance plus a margin determined by BDL.
60 days	USD: Interest rate paid by BDL on two-month USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest three-month treasury bill issuance plus a margin determined by BDL.
90 days	USD: Interest rate paid by BDL on three-month USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest three-month treasury bill issuance plus a margin determined by BDL.
180 days	USD: Interest rate paid by BDL on six-month USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest six-month treasury bill issuance plus a margin determined by BDL.
1 year	USD: Interest rate paid by BDL on one-year USD deposits plus a margin determined by BDL.<br>LBP: Actual yield rate of the latest one-year treasury bill issuance plus a margin determined by BDL.

Article 5: Declared Interest or Commission on Bond Sales and Repurchase (REPO)

Currency Issued (USD / LBP)
USD: Interest or commission on the sale and repurchase of USD bonds as determined by BDL.<br>LBP: Interest or commission on the sale and repurchase of LBP bonds as practiced by BDL.

Article 6: Operations specified in this decision may be conducted in major foreign currencies with deposit accounts open at BDL, provided that the same method for calculating interest, commissions, and margins applies to these operations as specified for USD operations.

Article 7: In case of necessity or urgent circumstances, the Governor of BDL retains the right to adjust the rates, interest, or commissions stipulated in this decision. Such adjustments shall be announced through any suitable media and communicated to the Central Council of BDL at its next subsequent session.

Article 8: Circulars to Banks No. 33 dated 29/11/1967, No. 569 dated 7/6/1985, and Decision No. 6135 dated 28/3/1996, as well as the implementation circular to Banks and Financial Institutions No. 1418 dated 28/3/1996, are hereby repealed.
(Note: Circular numbers follow the old numbering system.)

Article 9: This decision takes effect upon its issuance.
Article 10: This decision shall be published in the Official Gazette.

Beirut, 25 March 1998
Governor of the Central Bank of Lebanon
Riad Tawfiq Salamah