Exceptional Measures to Revive the Business of Banks Operating in Lebanon

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Central Bank Circular No. 154 Addressed also to the Supervisory Commissioners of Banks

We enclose a copy of Decision No. 13262 dated August 27, 2020, concerning exceptional measures to revive the operations of banks operating in Lebanon.

Beirut, August 27, 2020 Governor of the Central Bank of Lebanon Riad T. Salamé

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Decision No. 13262 Exceptional Measures to Revive the Business of Banks Operating in Lebanon

The Governor of the Central Bank of Lebanon, Pursuant to the Monetary and Banking Law, particularly Articles 70, 79, 104, 140, 174, 187, and 188 thereof, And pursuant to the provisions of Law No. 44 dated November 24, 2015, And considering the exceptional circumstances currently experienced by the country, And based on the decision of the Central Bank Council taken in its session held on August 25, 2020, HEREBY DECIDES THE FOLLOWING:

Article 1: Each bank shall conduct a fair valuation of its assets and liabilities to assist it in formulating the plan referred to in Article "Eleven" of Decision No. 6939 dated March 25, 1998, with a view to enabling it, within a limited time frame, to:

• Comply, as appropriate and possibly on an incremental basis, with all applicable legal provisions and banking regulations, particularly those concerning liquidity and solvency.
• Reactivate its usual activities and services for its clients to no less than the level they were at prior to October 2019.

Article 2: First: -1) While maintaining the concept of Decision No. 13217 dated April 9, 2020, banks shall, to enhance their liquidity (particularly among their foreign correspondents), encourage clients who transferred an amount exceeding five hundred thousand US dollars or its equivalent in other foreign currencies abroad during the period starting from July 1, 2017 until the date of issuance of this decision (to be deposited in a "Special Account" frozen for eight years), to deposit an amount equivalent to 15% of the transferred value. (Footnote 1: The freezing period of the "Special Account" was amended from "five years" to "eight years" pursuant to Article 1 of Interim Decision No. 13665 dated September 20, 2024 (Interim Circular No. 707).) The concerned bank is exempt from mandatory placement at the Central Bank of Lebanon in foreign currencies against any "Special Account". -2) Banks shall encourage their importer clients to transfer from abroad into a "Special Account" enjoying the same conditions specified in Item (1) of this section, an amount equivalent to 15% of the value of open letters of credit in any one of the following three years: 2017, 2018, or 2019. -3) Interest may be paid on the "Special Account" without being subject to the interest caps specified in Decision No. 13100 dated September 3, 2019.

Second: Item "First" of this Article applies to the chairmen, board members, and major shareholders of banks, as well as to "Senior Executive Management" of banks and politically exposed persons (PEPs) of the banks, whether directly, indirectly, or through companies owned by any of them. The application of Item "Second" shall adopt a 30% ratio instead of 15%. Third: The concerned bank shall primarily utilize this type of deposits to facilitate external operations that stimulate the national economy. Fourth: To ensure the success of the concerned bank's initiative, it shall adopt an appropriate legal framework governing the relationship between the bank and the client to strengthen the latter's confidence in recovering its deposit, regardless of circumstances, upon the agreed maturity. Fifth: Each bank shall provide written explicit notice to the persons specified in this Article and subject to its provisions, confirming such. Furthermore, supervisory commissioners shall promptly respond to all requests for information or clarifications submitted by the Governor of the Central Bank regarding the application and/or correctness of the application of this Article's provisions by the supervised bank.

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Article 3: Each bank shall establish an external account free from any obligations with its foreign correspondents, which at no time shall be less than 3% of the total foreign currency deposits held by it, as of June 30, 2025. Banks found non-compliant with the provisions of the first paragraph of this Article are granted a grace period until June 30, 2026, to regularize their status. (Footnote 1: The latest amendment to this Article was introduced by Interim Decision No. 13741 dated August 14, 2025 (Interim Circular No. 739).)

Included in this ratio:

• The market value of Lebanese foreign currency Treasury bonds (Eurobonds) deposited with "Midclear S.A.L." or held abroad as a custodian, and classified at fair value (FVPL) and (FVOCI). All prior special approvals granted to banks in this regard are deemed revoked.
• The value of bonds specified in Items (a) and (b) of Item (2) of the "First" paragraph of Article 1 of Decision No. 7274 dated April 15, 1999 (Central Bank Circular No. 62), classified at fair value.

Article 4: First: Each bank, based on the plan it has formulated and referred to in Article 1 above, and following an individual assessment of its status, shall apply to the Central Bank Council for approval to reconstitute and/or increase its capital, as needed, during the first quarter of 2021, after having complied with all applicable legal provisions and banking regulations. Second: The Central Bank Council shall take its decision in this regard based on mandatory laws and applicable regulatory provisions. Third: Banks shall take the necessary legal and regulatory measures to enable depositors to voluntarily convert their deposits into shares in the bank's capital and/or into "Redeemable, Tradable, and Convertible Perpetual Bonds" which may grant bondholders, at the issuing bank's discretion, the right to exercise a preemptive subscription right in any capital increase, subject to:

• Notifying the concerned person of the details and legal characteristics of these operations, explaining them clearly and fully.
• Notifying relevant depositors, in case of converting their deposits into shares, with an estimated valuation report for their shares approved by the Central Bank Council.
• Listing all bank shares exclusively on the Lebanese Stock Exchange, in compliance with Lebanese sovereign laws and those governing the Capital Markets Authority and its issued regulations.
• Separating the chairmanship of the Board of Directors from the management of the concerned bank, in accordance with Article 153 of the Commercial Code.

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Fourth: The proceeds from selling shares traded on the Stock Exchange and the proceeds from selling "Redeemable, Tradable, and Convertible Perpetual Bonds" may be transferred abroad if the sale is made with new funds, in accordance with Decision No. 13217 dated April 9, 2020. Fifth: Interest may be paid on "Redeemable, Tradable, and Convertible Perpetual Bonds" without being subject to the interest caps specified in regulatory provisions issued by the Central Bank.

Article 5: First: A bank that violates the provisions of this decision or fails to implement it shall be subject to:

• Referral, pursuant to Article 208 of the Monetary and Banking Law, to the Higher Banking Authority to impose appropriate administrative sanctions against it.
• Application of fines and criminal penalties stipulated in the Monetary and Banking Law.
• Application of any provisions of Laws No. 67/2 dated January 16, 1967 (Banks' Suspension of Payments) and No. 110 dated November 7, 1991 (Banking Sector Restructuring). Second: Furthermore, any person who fails to implement the provisions of this decision shall be subject, as applicable, to measures and penalties stipulated in Law No. 44 dated November 24, 2015 (Anti-Money Laundering and Counter-Terrorist Financing), particularly regarding the crimes referred to in Items (9) and (21) of Article 1 thereof.

Article 6: The supervisory commissioners of each bank, pursuant to Article 187, Paragraph 1 of the Monetary and Banking Law, shall verify the correct application of this decision's provisions. Furthermore, pursuant to the final paragraph of Article 7 of Law No. 44 dated November 24, 2015, they shall promptly notify the President of the Special Investigation Commission regarding details of operations they observe during their duties that they suspect conceal money laundering or terrorist financing.

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Article 7: This decision shall take effect upon its issuance. Article 8: This decision shall be published in the Official Gazette.

Beirut, August 27, 2020 Governor of the Central Bank of Lebanon Riad T. Salamé