Reserve Requirements

559 Text/Section/1 R/84 T /2025-6-30

Basic Circular for Banks No. 84

We enclose a copy of Basic Decision No. 7835 dated June 2, 2001 regarding Reserve Requirements.

Beirut, June 2, 2001 Governor of the Central Bank of Lebanon Riad T. Salamé Old No. 1918

560

Basic Decision No. 7835 Reserve Requirements

The Governor of the Central Bank of Lebanon, pursuant to the Monetary and Credit Law, particularly Articles 70, 76, 77, 78, 79, and 174 thereof, and based on the decision of the Central Council taken in its meeting held on May 30, 2001, decides as follows:

First: Obligations subject to reserve requirements.

Article 1: Definition of obligations subject to reserve requirements: Obligations are defined in Lebanese Lira (LBP) subject to reserve requirements by monthly position components, distributed between demand liabilities and time liabilities, according to Table RO-01 (attached), including funds deposited or to be deposited as banknotes in new LBP accounts subject to "Article 1" of Basic Decision No. 13548 dated April 19, 2023.

Article 2: Procedures for organizing and submitting the statement of obligations subject to reserve requirements to the Central Bank of Lebanon: Banks are requested to provide the Economics Department at the Central Bank of Lebanon weekly with a statement on the average LBP obligations subject to reserve requirements for the week extending from Thursday to Wednesday inclusive, according to Form RO-01, within a maximum deadline of the following Monday after Wednesday.

1 - Last amended by Article 1 of Interim Decision No. 13556 dated June 19, 2023 (Interim Circular No. 670), effective from the position spanning Thursday, June 15, 2023 to Wednesday, June 21, 2023. 2 - Amended by Article 1 of Interim Decision No. 13685 dated January 13, 2025 (Interim Circular No. 722), effective from the position ending January 29, 2025. 3 - The department's name was updated to "Economics Department" instead of "Statistics and Economic Research Directorate" per Decision No. 13779 dated November 28, 2025.

561 Text/Section/1 R/84 T /2025-6-30 Second: Cash reserve requirements.

Article 3: Rate of cash reserve requirements: 1 - Banks operating in Lebanon, except commercial banks and medium-to-long term credit banks, are required to establish a cash reserve at the Central Bank of Lebanon on the total net LBP obligations subject to reserve requirements (i.e., after applying permitted deductions) as follows: a - 25% of the weekly average total demand liabilities. b - 15% of the weekly average total time liabilities. 2 - Time liabilities subject to part of the reserve requirement are deducted, and the resulting reserve is reduced according to Articles 7, 8, 9, 10, and 10 bis, and Section "Sixth" of this decision, within a maximum cap of 90% of the value of the reserve arising from the bank's obligations as reflected in its suspended balance sheet on 3/31, 6/30, 9/30, or 12/31 preceding the deduction date.

1 - Article 7 of Decision No. 7934 dated September 27, 2001 (Interim Circular No. 1952) states: This decision takes effect from October 20, 2001. The first period for calculating the average obligations subject to reserve requirements under Decision No. 7925 is from Thursday, October 25, 2001 to Wednesday, October 31, 2001. 2 - Last amended by Article 1 of Interim Decision No. 8286 dated November 16, 2002 (Interim Circular No. 25). 3 - Last amended by Article 1 of Interim Decision No. 10640 dated January 29, 2011 (Interim Circular No. 243), effective from the Thursday following two weeks of issuance. 4 - This paragraph was repealed by Interim Decision No. 8313 dated December 16, 2002 (Interim Circular No. 27), effective from January 17, 2003; its Article 1 states: "The text of paragraphs (2) and (3) of Article 3 of Basic Decision No. 7835 dated June 2, 2001 is repealed, provided that subscriptions in special treasury bonds issued before this decision takes effect continue until maturity."

562 Article 4: Deadlines and method for calculating cash reserve requirements: 1 - The week used to calculate the average LBP obligations is five days, starting Thursday and ending the following Wednesday, excluding Saturdays and Sundays. 2 - The reserve requirement is calculated as a one-period average of five days (from Monday to Friday). Calculation is based on the total daily cash balances of banks. 3 - Balances for official holidays are considered equal to the closing balance of the preceding working day, except Thursday balances, which use the preceding working day's closing balance adjusted for treasury bill subscriptions and maturities (added or subtracted). This adjustment does not apply to maturity of certificates of deposit issued by the Central Bank. In case of sudden holidays, the balance of the first subsequent working day is used. If the entire calculation period is an official holiday, the average balances of the immediately preceding period are used, even if it includes a Thursday. 4 - To calculate the reserve requirement rate: a - Daily cash balances of banks at CBL include current accounts opened in LBP before April 19, 2023, and new LBP accounts subject to Basic Decision No. 13548 dated April 19, 2023. b - Daily cash balances of banks at CBL exclude: accounts dedicated to USD purchase operations by the foreign exchange unit for clients; time accounts and frozen accounts for capital increase.

1 - Last amended by Article 2 of Interim Decision No. 13685 dated January 13, 2025 (Interim Circular No. 722), effective from the position ending January 29, 2025.

563 Text/Section/1 R/84 T /2025-6-30 5 - The reserve requirement rate is applied based on the average LBP obligations subject to reserve requirements for a single five-day period starting from the Monday following Wednesday (i.e., the end of the period used to calculate the average obligations per paragraph 1) and ending on the following Friday. Example: Reserve calculation periods: From Monday 2025/2/3 to Friday 2025/2/7 Average obligations subject to reserve requirements: From Thursday 2025/1/23 to Wednesday 2025/1/29

Article 5: The Central Bank of Lebanon may apply different rules from those in the first four articles to any bank if its situation warrants special measures.

Third: Penalty interest arising from actual reserve falling below the required reserve.

Article 6: Rate of penalty interest: The rate is set at the lending rate applied by the Central Bank of Lebanon against commercial papers. The Central Bank may decide on the method and timing for collecting penalty interest.

564 Fourth: Deductions of time liabilities subject to part of the reserve requirements.

Article 7: Deducted from total time liabilities used to calculate part of the reserve requirement, within the maximum cap mentioned in paragraph (2) of Article 3 and subject to regulatory provisions issued by CBL: 1 - Balances of medium-to-long term loans to productive/value sectors, or the actual value of medium-to-long term debt securities issued (whether to finance these sectors or to support these loans and purchased by banks, approved by CBL), provided that interest and commissions of any kind do not exceed:

• FX loans by funding cost + 2% (calculated annually from loan implementation date).
• LBP loans at 85% of the yield of one-year Lebanese treasury bills + 3% (calculated annually from loan implementation date). 2 - Balances of FX loans to small and medium enterprises (SMEs) guaranteed by Kafalat S.A.L., which do not benefit from subsidized interest. 3 - Balances of loans and advances to industrial, tourism, and agricultural sectors, including FX loans guaranteed by Kafalat S.A.L., which CBL approves for subsidized interest without needing Central Council approval for deduction.

1 - Replaced the phrase "Obligations subject to reserve requirements" with "Time liabilities subject to part of reserve requirements" per Article 4 of Decision No. 7934 dated September 27, 2001 (Interim Circular No. 1952), effective from October 20, 2001. 2 - Last amended at the beginning of this article by Article 2 of Interim Decision No. 10352 dated January 11, 2010 (Interim Circular No. 213), effective from the Thursday following two weeks of issuance. 3 - Last amended by Article 3 of Interim Decision No. 10352 dated January 11, 2010 (Interim Circular No. 213), effective from the Thursday following two weeks of issuance. 4 - References Basic Decision No. 6116 dated March 7, 1996 (attached to Basic Circular No. 23), particularly Article 6.

565 Text/Section/1 R/84 T /2025-6-30 4 - Foreign currency debt instruments purchased without recourse, and loans granted to financial institutions and collective investment bodies for the exclusive purpose of purchasing foreign currency debt instruments. 5 - Balances of LBP deposits from the "Military Housing Device for Volunteers" (Jihaz Askan al-Motawieen), consisting exclusively of contributions from members. 6 - Total LBP deposits belonging to the Housing Savings/Loan Program, after obtaining prior approval from the Central Council of CBL for the program. 7 - Purchase price of securities purchased by banks, which CBL has processed according to regulatory provisions, provided these securities are issued in LBP against bonds with maturities between three and five years related to economic financing (housing, agricultural, industrial, tourism, or craft). 8 - Balances of FX loans financed or granted with guarantees from: IFC, EIB, OPIC, AFD, and AFESD, after obtaining Central Council approval for the total amounts intended to be invested in these loans. 9 - FX loans granted to finance environmentally friendly projects that do not benefit from state-subsidized interest, as specified in Section "Sixth" of this decision. 10 - FX loans granted to finance environmentally friendly projects that benefit from state-subsidized interest, as specified in Section "Sixth" of this decision.

1 - References Banking Supervision Committee Circular No. 233 dated August 7, 2001. 2 - Added by Article 2 of Interim Decision No. 9570 dated April 2, 2007 (Interim Circular No. 134), effective from the Thursday following two weeks of issuance. 3 - Added by Article 1 of Interim Decision No. 10187 dated June 26, 2009 (Interim Circular No. 197), then amended by Article 2 of Interim Decision No. 10572 dated November 25, 2010 (Interim Circular No. 236), effective from the Thursday following two weeks of issuance.

566 11 - Balances of medium-to-long term housing loans, provided that interest and commissions of any kind do not exceed:

• FX loans by funding cost + 2% (calculated annually from loan implementation date).
• LBP loans at 85% of the yield of one-year Lebanese treasury bills + 3% (calculated annually from loan implementation date).

Article 7 bis: To obtain approval for dealing with institutions or funds mentioned in paragraph (8) of Article 7 above, and to benefit from Articles 7 and 9 of this decision, banks must submit a request to CBL accompanied by three copies (one original) of agreements signed with the relevant institutions/funds and loan programs to be implemented in Lebanon, including loan terms, guarantee conditions, and distribution of loans across economic sectors, plus any other documents CBL deems necessary.

1 - Added by Article 4 of Interim Decision No. 10352 dated January 11, 2010 (Interim Circular No. 213), effective from the Thursday following two weeks of issuance. 2 - Added by Article 3 of Interim Decision No. 9570 dated April 2, 2007 (Interim Circular No. 134), effective from the Thursday following two weeks of issuance.

567 Text/Section/1 R/84 T /2025-6-30 Article 8: Procedures for deducting time liabilities subject to part of the reserve requirements: 1 - Deduction of time liabilities subject to part of the reserve requirement against loans under paragraphs (1), (2), (3), and (9) of Article 7: a - Application for approval to reduce time liabilities against loans under paragraphs (1), (2), and (9) is submitted to the Governor's Office in three copies (one original), accompanied by the loan contract and other documents, organized according to Form RO-1A (with "New" column specified). Deductions for loans benefiting from subsidized interest under paragraphs (3) and (10) are applied upon approval of the subsidy without Central Council approval, based on the table attached to the subsidy request. b - After Central Council or Governor's approval, the Risk Management Department provides the concerned bank with debtor numbers and loan IDs.

1 - Replaced "Obligations subject to reserve requirements" with "Time liabilities subject to part of reserve requirements" per Article 4 of Decision No. 7934 dated September 27, 2001 (Interim Circular No. 1952), effective from October 20, 2001. 2 - Amended at the beginning of this paragraph by Article 2 of Interim Decision No. 10187 dated June 26, 2009 (Interim Circular No. 197), effective from the Thursday following two weeks of issuance. 3 - Amended by Article 3 of Interim Decision No. 10187 dated June 26, 2009 (Interim Circular No. 197), effective from the Thursday following two weeks of issuance.

c - To calculate deductions, banks must declare weekly to the Financing Unit the balances of used and suspended loans by Wednesday close, within a maximum deadline of the following Monday, according to Form RO-2A. d - Reserve calculation occurs on the Monday following Wednesday (end of period). Deduction value is based on loan balances (excluding interest) declared to Risk Management or amortization schedules, whichever is lower. A fixed average exchange rate for the FX loan is adopted throughout the loan term from the approval date. Banks must obtain CBL approval for any amendment to loan limit, maturity, or schedule and notify CBL. Request submitted to Governor's Office in three copies (one original), with amendment documents, organized per Form RO-1A (or RO-1PB for subsidized loans). Deductions stop if the loan becomes doubtful or loss per regulatory provisions.

1 - Amended by Article 3 of Interim Decision No. 13685 dated January 13, 2025 (Interim Circular No. 722), effective from the position ending January 29, 2025. 2 - Replaced "Obligations subject to reserve requirements" with "Time liabilities subject to part of reserve requirements" per Article 4 of Decision No. 7934 dated September 27, 2001 (Interim Circular No. 1952), effective from October 20, 2001.

568 c - To calculate deductions from time liabilities subject to part of the reserve requirement, banks must declare weekly to the Financing Unit the balances of used and suspended loans by Wednesday close, within a maximum deadline of the following Monday, according to Form RO-2A. d - Reserve calculation occurs on the Monday following Wednesday (end of period). e - Deduction value is based on loan balances (excluding interest) declared to Risk Management or amortization schedules, whichever is lower. f - A fixed average exchange rate for the FX loan is adopted throughout the loan term from the approval date. g - Banks must obtain CBL approval for any amendment to loan limit, maturity, or schedule and notify CBL. Request submitted to Governor's Office in three copies (one original), with amendment documents, organized per Form RO-1A (or RO-1PB for subsidized loans).

1 - Amended by Article 3 of Interim Decision No. 13685 dated January 13, 2025 (Interim Circular No. 722), effective from the position ending January 29, 2025. 2 - Replaced "Obligations subject to reserve requirements" with "Time liabilities subject to part of reserve requirements" per Article 4 of Decision No. 7934 dated September 27, 2001 (Interim Circular No. 1952), effective from October 20, 2001.

569 Text/Section/1 R/84 T /2025-6-30 h - Deductions stop if the loan becomes doubtful or loss per regulatory provisions. 2 - Deduction of time liabilities subject to part of the reserve requirement against instruments and loans under paragraph (4) of Article 7: a - Application for approval to reduce time liabilities is submitted to the Governor's Office in three copies (one original), accompanied by Form RO-3A and copies of purchased foreign currency debt instruments without recourse, or documents related to loans granted to financial/investment bodies exclusively for purchasing such instruments. Economic sector and issuer (private/public) must be specified per Risk Management Department tables. b - After Central Council approval, banks declare weekly to the Financing Unit by Monday close the status of approved instruments/loans suspended on Wednesday, according to Form RO-4A. Reserve calculation occurs on Monday following Wednesday.

1 - References Banking Supervision Committee Circular No. 233 dated August 7, 2001. 2 - Replaced "Obligations subject to reserve requirements" with "Time liabilities subject to part of reserve requirements" per Article 4 of Decision No. 7934 dated September 27, 2001 (Interim Circular No. 1952), effective from October 20, 2001. 3 - Amended by Article 3 of Interim Decision No. 13685 dated January 13, 2025 (Interim Circular No. 722), effective from the position ending January 29, 2025.

c - Names of signatories/endorsers are declared to the Central Banking Risk Management Department in monthly positions. d - Nominal value of foreign currency debt instruments/loans is adopted based on a fixed exchange rate throughout their term from the approval date. e - Conditions for foreign currency debt instruments/loans: transferable, freely tradable without recourse, resulting from genuine FX debts related to economic activity in Lebanon. Total purchases/loans by any bank capped at 4% of total foreign currency deposits (as per Dec 31 annual balance sheet). Instruments purchased from related/affiliated entities must not be direct debts of those selling entities. Public sector instruments value cannot exceed private sector ones for deduction purposes.

1 - Amended by Article 1 of Interim Decision No. 8781 dated July 13, 2004 (Interim Circular No. 58). 2 - Replaced "Obligations subject to reserve requirements" with "Time liabilities subject to part of reserve requirements" per Article 4 of Decision No. 7934 dated September 27, 2001 (Interim Circular No. 1952), effective from October 20, 2001.

570 c - Names of signatories/endorsers are declared to the Central Banking Risk Management Department in monthly positions. d - Nominal value of foreign currency debt instruments/loans is adopted based on a fixed exchange rate throughout their term from the approval date. e - Conditions for foreign currency debt instruments/loans: transferable, freely tradable without recourse, resulting from genuine FX debts related to economic activity in Lebanon. Total purchases/loans by any bank capped at 4% of total foreign currency deposits (as per Dec 31 annual balance sheet). Instruments purchased from related/affiliated entities must not be direct debts of those selling entities. Public sector instruments value cannot exceed private sector ones for deduction purposes.

1 - Amended by Article 1 of Interim Decision No. 8781 dated July 13, 2004 (Interim Circular No. 58). 2 - Replaced "Obligations subject to reserve requirements" with "Time liabilities subject to part of reserve requirements" per Article 4 of Decision No. 7934 dated September 27, 2001 (Interim Circular No. 1952), effective from October 20, 2001.

571 Text/Section/1 R/84 T /2025-6-30 f - Public sector instruments value cannot exceed private sector ones for deduction purposes. 3 - Deduction of time liabilities subject to part of the reserve requirement against deposits and securities under paragraphs (1), (5), (6), and (7) of Article 7: a - Balances of deposits under paragraphs (5) and (6) are deducted directly from time liabilities defined in Article 1. b - Deductions for securities under paragraphs (1) and (7) are calculated equivalent to the nominal value of instruments in paragraph (1) and purchase price of securities in paragraph (7). A fixed exchange rate is adopted for FX securities upon CBL approval. Banks declare weekly to the Financing Unit by Monday close the status of purchased instruments suspended on Wednesday, according to Form RO-4A. Reserve calculation occurs on Monday following Wednesday.

1 - Replaced "Obligations subject to reserve requirements" with "Time liabilities subject to part of reserve requirements" per Article 4 of Decision No. 7934 dated September 27, 2001 (Interim Circular No. 1952), effective from October 20, 2001. 2 - Amended by Article 3 of Interim Decision No. 13685 dated January 13, 2025 (Interim Circular No. 722), effective from the position ending January 29, 2025.

572 d - Reserve calculation occurs on Monday following Wednesday (end of period). 4 - Deduction of time liabilities subject to part of the reserve requirement against loans under paragraph (8) of Article 7: a - Application for approval for total amounts intended to be invested in loans under paragraph (8) is submitted to the Governor's Office in three copies (one original), specifying total amount per loan category. b - After Central Council approval, the bank provides the Financing Unit with a weekly table (Form RO-22A) of new loans not benefiting from interest subsidy, including guarantor signature. Risk Management Dept provides debtor/loan IDs after receiving Form RO-22A or Governor's approval.

1 - Added by Article 4 of Interim Decision No. 9570 dated April 2, 2007 (Interim Circular No. 134), effective from the Thursday following two weeks of issuance. 2 - Amended by Article 3 of Interim Decision No. 13685 dated January 13, 2025 (Interim Circular No. 722), effective from the position ending January 29, 2025.

573 Text/Section/1 R/84 T /2025-6-30 c - To calculate deductions, banks declare weekly to the Financing Unit balances of used/suspended loans by Wednesday close, within a maximum deadline of the following Monday, according to Form RO-2A. d - Reserve calculation occurs on Monday following Wednesday (end of period). e - Deduction value is based on loan balances (excluding interest) declared to Risk Management or amortization schedules, whichever is lower.