Regulatory Capital for Calculating the Prudential Limits on Banks Operating in Lebanon

Circular No. 690

To Banks

We enclose a copy of Interim Decision No. 13617 dated 2/2/2024 concerning the amendment of Basic Decision No. 6938 dated 25/3/1998 on (the Special Funds for calculating the Regulatory Ratios of Banks operating in Lebanon). Attached to Basic Circular No. 43 for Banks.

Beirut, on 2 February 2024

Acting Governor of the Central Bank of Lebanon Dr. Wissam Mansouri

Interim Decision No. 13617
Amending Basic Decision No. 6938 dated 25/3/1998 concerning the Special Funds for calculating the Regulatory Ratios of Banks operating in Lebanon

The Acting Governor of the Central Bank of Lebanon, having regard to the Monetary and Discount Law, particularly Articles 174, 175, and 176 thereof; the Basic Decision No. 6938 dated 25/3/1998 and its amendments concerning the Special Funds for calculating the Regulatory Ratios of Banks operating in Lebanon; and based on the Interim Decision of the Central Board of the Central Bank of Lebanon taken in its meeting held on 2/2/2024,

hereby decides as follows:

Article One: The text of the second paragraph of Item (9) of Article Two of Basic Decision No. 6938 dated 25/3/1998 is repealed and replaced with the following text:

• "The cumulative change in the fair value of financial instruments classified as fair value through other comprehensive income (FVOCI)."
  (Cumulative Change in the Fair Value of Financial Instruments Classified as Fair Value Through OCI)

Article Two: The text of Article Three of Basic Decision No. 6938 dated 25/3/1998 is repealed and replaced with the following text:
"The regulatory adjustments include the following deductions:

1. The financial year result, if positive, and the balance sheet accounts, if positive.
2. 25% of the cumulative change in fair value of financial instruments classified as FVOCI, if positive.
   (Changes in Fair Value of the Financial Instruments Classified as Fair Value Through OCI – If positive)
3. The negative or positive reserve arising from cash flow hedges (Cash Flow Hedge Reserves).
4. The negative or positive reserve arising from changes in own credit risk (Own Credit Risk).
5. Other positive reserves related to other comprehensive income items.
6. The shortfall in the reserve for real estate and participations required to be set up against them.
7. The shortfall in the special reserve required to be set up against doubtful and bad debts which have not been settled by virtue of Basic Decision No. 7694 dated 18/10/2000.
8. Ordinary shares and bonds related to special funds that are repurchased directly or indirectly.
9. Goodwill and other intangible assets (Other Intangible Assets).
10. The shortfall in required provisions.
11. The excess over the provisions of Articles 152 or 153 of the Monetary and Discount Law (whichever is greater)."

Article Three: The operation is suspended, temporarily and until further notice, regarding the provisions of Items (7), (6) and (1) with deducting the excess over the provisions of Article 153 of the Monetary and Discount Law as stated in Item (11) of Article Three of Basic Decision No. 6938 dated 25/3/1998.

Article Four: This decision takes effect as of the suspended status dated 31/12/2023.

Article Five: This decision is published in the Official Gazette.

Beirut, on 2 February 2024

Acting Governor of the Central Bank of Lebanon Dr. Wissam Mansouri