Lebanese Banks' Deposits, Investments and Loans in Foreign Related Banks and Institutions Abroad

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Basic Circular for Banks No. 57: We enclose herewith a copy of Basic Decision No. 7156 dated 10/11/1998, concerning the deposits, investments and loans of Lebanese banks in foreign banks and institutions related to them.

Beirut, 10/11/1998
Governor of the Central Bank of Lebanon
Riad Tawfiq Salamah

316 / Basic Decision No. 7156: Deposits, Investments and Loans of Lebanese Banks in Foreign Related Banks and Institutions

The Governor of the Central Bank of Lebanon, pursuant to the Monetary and Credit Law, particularly Articles 153, 174 and 175 thereof, and based on the resolution of the Central Council adopted in its meeting held on 28/10/1998, hereby decides as follows:

Article One: The net deposits, investments and loans of any Lebanese bank shall not exceed 25% of its net basic own funds, in respect of:

• Foreign banks and financial institutions related to it (subject to exclusive supervision, joint supervision or apparent influence).
• Foreign-established sister banks and financial institutions and those related to them.
• Sister non-financial companies and institutions abroad related to it.
  The aforementioned investments do not include the participations and shareholdings stipulated in Article 153 of the Monetary and Credit Law.

Article Two:
First:

• Any Lebanese bank's direct or indirect participation or investment in any foreign financial sector (bank, financial institution, financial intermediary, collective investment scheme, insurance company...) is subject to prior approval from the Central Bank of Lebanon.

1. A final amendment was added to this Article pursuant to Article One of Interim Decision No. 9946 dated 8/7/2008 (Interim Circular No. 176).
2. This paragraph was amended pursuant to Article One of Interim Decision No. 11889 dated 27/10/2014 (Interim Circular No. 374).

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Text/Section/1 Dec./57 Circular 2018-6-30 /

2. For the purposes of applying the provisions of this Decision:
   a) Indirect participations or investments are considered as those carried out by companies or investment funds in the shares or stakes owned by the relevant Lebanese bank in their capital. b) Direct or indirect participations and investments include direct or indirect subscriptions or investments in capital instruments accepted within the categories of own funds under Basic Decision No. 6939 dated 25/3/1998 and issued by the foreign financial sector, including subordinated debt bonds, cash advances, preferred shares and other capital instruments.

3. The aforementioned approval does not apply to the Lebanese bank's indirect participations or investments made through foreign banks or financial institutions in which the Central Bank of Lebanon has approved ownership, directly or indirectly, of shares or stakes in their capital, provided that one of the following two conditions is met:
   a) The Lebanese bank owns 20% or more of the total shares or stakes of foreign banks or financial institutions intending to participate or invest in the foreign financial sector, with a ratio less than 20% of their own funds. b) The Lebanese bank owns less than 20% of the total shares or stakes of foreign banks or financial institutions intending to participate or invest, regardless of the ratio of such participation or investment.

4. Direct or indirect participations, investments, deposits and mandatory allocations imposed by laws, regulations or relevant authorities (banking, financial...) in the host country are subject to the approval of the Central Bank of Lebanon:

• Branches of Lebanese banks abroad.

1. This paragraph was added pursuant to Interim Decision No. 12814 dated 28/5/2018 (Interim Circular No. 493).

• Foreign banks, financial institutions and investment funds in which the Lebanese bank abroad participates or invests.
  The relevant Lebanese bank must immediately notify the Central Bank of Lebanon and the Banking Control Commission with details of the operations subject to this paragraph, in order to obtain the Central Bank's approval for undertaking them, at its full responsibility. The Central Bank of Lebanon may require the relevant Lebanese bank to set up specific provisions against these participations, investments, deposits or mandatory allocations.

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Second: The Central Bank of Lebanon conditions its approval on the foreign financial companies mentioned above and intended to be participated in or invested in by Lebanese banks meeting conditions similar to those required under Basic Decision No. 9286 dated 9/3/2006 concerning the scientific, technical and professional qualifications required to perform certain tasks in the financial and banking sectors.

Third: The relevant Lebanese bank must notify the Central Bank of Lebanon and the Banking Control Commission of indirect participations or investments made through foreign banks or financial institutions mentioned in paragraph three of the "First" section above of this Article, immediately upon becoming aware of them.

318 / Article Three: Lebanese banks whose operations with sister or related non-financial companies abroad do not comply with the provisions of Article One above as of the date of issuance of this Decision shall settle their status within a period of one year from its issuance.

∗ Article Four: The following regulatory texts issued by the Central Bank of Lebanon are repealed:
Decision No. 6572 dated 24/4/1997, implemented by Circular for Banks and Financial Institutions No. 1520 dated 24/4/1997, and Decision No. 6868 dated 16/1/1998, implemented by Circular for Banks and Financial Institutions No. 1588 dated 16/1/1998. ∗ Circular numbers are according to the old numbering system.

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

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

Beirut, 10/11/1998
Governor of the Central Bank of Lebanon
Riad Tawfiq Salamah