Central Bank of Lebanon Basic Decision No. 6180 on Housing Savings and Borrowing Programs

٨١ (Page 81) Text/Section/1st Rev/25th Iss. - 31/12/2022 Basic Circular for Banks No. 25

We present to you Basic Decision No. 6180 dated May 31, 1996, concerning the Housing Savings/Borrowing Programs that banks may adopt to obtain certain exemptions from the Central Bank of Lebanon.

Beirut, May 31, 1996 Governor of the Central Bank of Lebanon Riad T. Salamé Old No. 1436

٨٢ (Page 82) Basic Decision No. 6180

Whereas the Governor of the Central Bank of Lebanon, pursuant to the Monetary and Credit Law, particularly Articles 70, 76, 79, and 174 thereof, and after consulting the Lebanese Banks Association, and based on the decision taken by the Central Council in its meeting held on May 29, 1996, decides as follows:

Article 1: Any bank may establish a housing savings/borrowing program aimed at encouraging every adult or minor Lebanese individual, resident or non-resident, to save with a view to subsequently borrowing to purchase, construct, or renovate a residence for themselves in Lebanon. The concerned bank may benefit from the exemptions mentioned in Article 5 of this Decision, provided it obtains prior approval from the Central Council of the Central Bank of Lebanon for its program and complies with the conditions specified in Articles 2, 3, and 4 below.

Article 2: The housing savings/borrowing program submitted for approval by the Central Council of the Central Bank of Lebanon must include the following:

• (a) The opening of a single personal savings account for program subscribers, with a minimum duration of five years, during which deposits are frozen up to a maximum amount (principal and interest) of 150 million Lebanese Lira for accounts opened in Lira, or 100,000 US Dollars for accounts opened in foreign currency. Withdrawals from this account before the end of the freeze period are permitted only for justified reasons and after notifying the Banking Control Commission.
• (b) The bank's commitment, in the savings/borrowing account opening agreement, to grant the program subscriber, upon the agreed maturity and after settlement of the savings account, a loan meeting the following two conditions:
  • The loan value shall not be less than twice the savings account balance (principal and interest), or two-thirds of the estimated value of the property subject to the loan, whichever is lower.
  • The specified loan repayment period in the borrowing request shall not be less than ten years.
• (c) The existence of a specific framework for resolving disputes between the bank and its program-subscribed clients.
• (d) A sample of the savings/borrowing agreement to be presented by the bank to prospective subscribers, including the essential rights and obligations of both parties.

٨٣ (Page 83) Article 3: The bank shall determine, in agreement with the program subscriber and within the savings/borrowing agreement, the following:

• 1. The currency in which the savings and borrowing operations will be executed.
• 2. The basis for calculating savings and borrowing interest rates within the following framework:
  • (a) The savings interest rate shall not be lower than half the yield on one-year Treasury bonds if the account is in Lebanese Lira, and the six-month SOFR Term rate plus the ISDA Adjustment Spread minus 1% if the account is in foreign currency.
  • (b) The borrowing interest rate shall not exceed half the yield on one-year Treasury bonds plus 4% if the account is in Lebanese Lira, and the six-month SOFR Term rate plus the ISDA Adjustment Spread plus 3% if the account is in foreign currency.
• Amended by Article 4 of Interim Decision No. 13475 dated September 23, 2022 (Interim Circular No. 640), which stipulates in its Article 7: "Banks are granted a maximum deadline of June 30, 2023, to amend the contracts and related information systems linked to the aforementioned interest rates and notify affected clients accordingly, with these amendments taking effect as of July 1, 2023."

Article 4: The concerned bank must maintain housing savings and loan accounts independently and separately from other accounts included in its balance sheet across all chapters.

٨٤ (Page 84) Article 5: The total deposits in Lebanese Lira related to housing savings/borrowing programs shall be deducted from the total liabilities used to calculate part of the mandatory reserve. Amounts in foreign currency deposited under the housing savings/borrowing program shall not be taken into account when calculating the ratio specified by the Central Bank of Lebanon as the upper limit for foreign currency lending to deposits in those currencies.

Article 6: The bank seeking the approval mentioned in Article 1 must have a capital of no less than ten billion Lebanese Lira. The Central Council of the Central Bank of Lebanon may grant this approval to a foreign bank branch based on the capital volume allocated to the branch's investments in Lebanon and the type of support provided by its head office.

Article 7: The Banking Control Commission is tasked with auditing the proper and regular operation of the housing savings/borrowing program adopted by the concerned bank, and verifying the continued compliance with the conditions for approving this program. The Central Bank of Lebanon shall cease granting the concerned bank the exemptions provided in this Decision if the specific exemption conditions are not met. Furthermore, administrative penalties stipulated in applicable laws and regulations shall be applied to the non-compliant bank, as appropriate.

Article 8: This Decision shall take effect upon its issuance.

Article 9: This Decision shall be published in the Official Gazette. Beirut, May 31, 1996 Governor of the Central Bank of Lebanon Riad T. Salamé

1 - The text of the first paragraph of this Article is amended by Article 6 of Decision No. 7934 dated September 27, 2001 (Circular 1952 - Old Numbering), which takes effect as of October 20, 2001.