Relationship Between Lebanese Banks and Financial Institutions and Their Affiliates Abroad

Text/Section 1 / Decision 110 / Date 2025-12-31

Basic Circular No. 110

Also applicable to Financial Institutions

We enclose a copy of Basic Decision No. 9671 dated August 16, 2007, concerning the relationship between Lebanese banks and financial institutions and their affiliates abroad.

Beirut, August 16, 2007
Governor of the Central Bank of Lebanon
Riad T. Salamé

Basic Decision No. 9671

The Relationship Between Lebanese Banks and Financial Institutions and Their Affiliates Abroad

The Governor of the Central Bank of Lebanon, pursuant to the Monetary and Loan Law, particularly Articles 174 and 182 thereof, and based on the decision of the Central Council of the Central Bank of Lebanon taken in its meeting held on August 14, 2007, hereby decides as follows:

Article 1: For the purpose of applying the provisions of this Decision, the following terms are defined as follows:
"Parent Companies": Lebanese banks or financial institutions that have "affiliates" abroad.
"Affiliates": Foreign branches or foreign banks or financial institutions that are owned by a Lebanese "Parent Company", directly or indirectly, holding at least 40% of its voting rights, or over which the "Parent Companies" effectively exercise management control, regardless of their ownership percentage.

Text/Section 1 / Decision 110 / Date 2025-12-31
Article 2: The "Parent Companies" shall:
First, obtain from their foreign "Affiliates":

• 1. An annual business plan (Plan Business Annual);
• 2. A quarterly report (Letter Business) outlining the performance of foreign "Affiliates" compared to the established business plan and the risks they face;
• 3. Monthly financial statements (balance sheet and income statement) required in the host country, or in their absence, monthly financial statements prepared according to applicable Lebanese regulations, including those related to Islamic banks;
• 4. Supervisory commissioners' reports;
• 5. Reports from the regulatory authorities in the host country and the responses of the relevant "Affiliates" to these reports, provided that this does not conflict with regulations in force in the host country;
• 6. Internal audit reports.

Second, provide to:

• 1. Each of the Non-Banking Financial Institutions Directorate [¹] and the Economics Department [²] at the Central Bank of Lebanon, a copy of the documents referred to in item (3) under "First" of this Article;
• 2. The Banking Supervision Committee, a copy of:
     a- The statements and reports specified in items (3) and (4) under "First" of this Article; b- The documents specified in item (5) under "First" of this Article, provided that this does not conflict with regulations in force in the host country.

[¹] The name "Directorate of Financial Markets" was amended to become the "Directorate of Banking" pursuant to Central Bank Decision No. 11943 dated February 4, 2015. Subsequently, the name "Directorate of Banking" was amended to become the "Non-Banking Financial Institutions Directorate" pursuant to Decision No. 13788 dated December 30, 2025, effective as of January 1, 2026. - Refer to Circular No. 910 dated November 2, 2015. [²] The name of this directorate was amended to become the "Economics Department" instead of the "Directorate of Statistics and Economic Research" pursuant to Decision No. 13779 dated November 28, 2025.

Article 3: The "Parent Companies" shall establish a committee responsible for monitoring the status of foreign "Affiliates", composed of senior bank officials, with the participation of risk management specialists and one specialist in Islamic banking affairs, as applicable.
This committee shall meet periodically and perform, inter alia:

• 1. Reviewing reports, data, and documents received from "Affiliates" and issuing opinions thereon;
• 2. Requesting clarifications or any additional information;
• 3. Requesting the implementation of corrective measures and monitoring the extent to which "Affiliates" comply therewith;
• 4. Proposing the dispatch of a team to "Affiliates", as needed, to discuss and evaluate their strategy, performance, results, and risks on-site;
• 5. Providing the board of directors of the "Parent Company" with a summary of its meeting minutes and the quarterly (Letter Business) received from "Affiliates".

Article 4: The "Parent Companies" shall verify:

• 1. The adequacy of regulations and the extent to which management at "Affiliates" complies therewith, particularly internal control systems, risk management, internal audit, information technology security, and anti-money laundering;
• 2. The adequacy and efficiency of human resources at "Affiliates" and their obtaining the necessary qualifications to apply these regulations;
• 3. The availability of scientific, technical, and professional qualifications among employees at "Affiliates" similar to those required for performing certain tasks in the banking and financial sectors in Lebanon pursuant to Basic Decision No. 9286 dated March 9, 2006.

Text/Section 1 / Decision 110 / Date 2025-12-31
Article 5: The "Parent Company" shall annually dispatch an internal audit team to foreign "Affiliates" to monitor their operations and prepare reports on their status, which shall be submitted to the Audit Committee appointed by the board of directors of the "Parent Company" from among its non-executive members, or in the absence of such committee, to the board of directors of the "Parent Company".

Article 6: Banks and financial institutions are granted:

• 1. A deadline of December 31, 2007, to comply with the provisions of Article 5;
• 2. A deadline of March 31, 2008, to comply with the provisions of Articles 2, 3, and 4 of this Decision.
     The financial statements, reports, and documents referred to in items (3), (4), (5), and (6) under "First" of Article 2 above, pertaining to suspended accounts, shall be submitted for the first time as of December 31, 2007.

Article 7: The Banking Supervision Committee shall issue implementing regulations for the provisions of this Decision and monitor the correctness of their implementation.

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

Article 9: This Decision shall be published in the Official Gazette.
Beirut, August 16, 2007
Governor of the Central Bank of Lebanon
Riad T. Salamé