Dr. Joseph Torbey
Chairman of the Association of Banks in Lebanon (ABL)
Lebanese Banking Forum
London, November 2017
Excellences,
Dear Colleagues and Guests,
It gives me great pleasure to welcome you all and thank everyone for attending this event ‘The Lebanese Banking Forum’ in London, the leading world financial center before and after the Brexit. I am so delighted to have government, regulatory and supervisory authorities’ officials, senior banking executives, correspondent bank representatives, and other esteemed guests in this notable and friendly gathering and to have this pleasant opportunity to brief you on the latest regarding our banking industry and underscore few imperative points.
I would have liked to start my speech under better domestic political situation in Lebanon than it is today with the resignation of Prime Minister Hariri from office a few days ago, which hurt and shocked us, like many Lebanese who are keen on the unity and stability of their country. Yet, I would like to mention that the void in the third presidency will be dealt with, in accordance with existing constitutional and legal frameworks, like all deep-rooted democracies in the world and to which Lebanese are attached.
Ladies and Gentlemen,
Lebanon has been lately working hard, with the collaboration of international financial institutions and governments on formulating a massive infrastructure investment program of 20 billion USD to create a quality leap and an important economic growth shift, after existing policies and measures have reached a dead end. The program that hopefully will be announced in 2018 is to be implemented in two phases. The first phase involves spending 4 billion USD on 40 already existing infrastructure projects. The financing of this phase is available from external parties and requires an investment from the Lebanese side of 700 million USD out of which 400 million USD will be secured from BDL and the Ministry of Finance. The second phase of the plan consists of devoting 16 billion USD to finance 240 infrastructure projects. This phase will be managed by the World Bank for validating every project, and by the IMF to set the macroeconomic and fiscal frameworks. The financing is expected to be concessional loans for 30 years with a 10-year grace period provided by the international and regional financial institutions and funds, such as the European Investment Bank (EIB), Arab Economic Development Fund (AEDF), the Islamic Development Bank, and others. We as bankers and banks welcome and endorse such important venture and look forward to contributing to its success.
Dear Guests,
The Lebanese banking industry is robust and standing firm in face of two types of challenges: one is domestic and specific to the Lebanese economy and the other is international. As you may know the Lebanese banking sector is coping for the seventh consecutive year with the adverse repercussions of the Syrian crisis and influx of refugees, restraining its economic activity and real growth (between 1 to 2.5 percent) by influencing, among other things, tourism, trade, and foreign direct investment. Domestic economic activity has not recovered to the desired high level mainly due to the tense regional situation. On the international level, we are all conscious of the forces influencing the banking industry worldwide and the challenges and costs of the rapidly changing regulations and emerging risk threats, but it is our destiny to constantly adapt and move forward.
Yet, the activity and performance of the Lebanese banking sector remain sound and today’s sessions will elaborate on the growth in the financial statements and the high levels of liquidity and capital adequacy. The resilience of the Lebanese banking sector to domestic and regional turmoil and shocks, added to the public confidence in its soundness and wise risk management, remain the key characteristics, and support the sector’s favorable activity and performance. Other equally important features consist of being thoroughly regulated and supervised and pioneers in adopting and applying international regulations and best practices.
Ladies and Gentlemen,
Lebanon’s banks adopt and comply with the international norms and guidelines in most areas of the banking profession namely corporate governance, risk management, capital and liquidity adequacy, financial reporting, auditing, combating money laundering and financing of terrorism, sanctions and tax evasion. The boards include sufficient independent members with rich and diverse qualifications in the different areas of bank management and finance and the specialized board committees of which mainly the internal audit, the risk, and the compliance committees play their role in enhancing efficiency in key areas and assisting the board in exercising its responsibilities among which decision making and oversight. Board committees are comprised of independent and non-executive board members with experience in these matters. The banking system in Lebanon is one of the first to adopt global standards and often goes beyond what is initially required. Lebanese banks started to commit to the requirements of the IFRS9 as early as 2016 though they would become effective in 2018 and also to the requirements of Basel III ahead of time and more forcefully to meet higher risks under the existing operating environment. They will secure a total capital adequacy ratio of 14.5% and 15% at the end of 2017 and 2018 respectively. The share of common stocks should represent a minimum of 9.0% and core capital of 12%. These ratios include a capital conservation buffer which should reach 4.5% of risk weighted assets at the end of 2018.
Dear Invitees,
The fight against money laundering and financing of terrorism by way of applying and adhering to international rules and regulations and respecting the supremacy of international resolutions and sanctions lists has always been, and will always be a firm commitment of our banks and it is for our industry a priority and an endless process. The reputation and protection of our banks and customers take precedence over anything else and today’s interventions will clarify where we stand in this area.
In this context, the ABL formed, some five years ago, a team from its board members aimed at lobbying for protecting the Lebanese financial system and integrity and strengthening relationships with correspondent banks. The correspondent relations are of vital interest to our highly dollarized industry and domestic economy. Routine visits to the US and the UK to clarify the rules and procedures adopted by Lebanese banks in their efforts to combat money laundering and terrorism financing and in complying with related international regulations and sanctions have been fruitful and we hope they will continue to be so in the future.
To close my speech,
In the current conjuncture, the recent resignation of Prime Minister Hariri, which came at a time of political aggravation of the conflict between Saudi Arabia and Iran, has surely impacted the political arena in Lebanon. We do not expect major aggravation of the situation; to the contrary, the wise handling of the political crisis will probably turn the adversity into opportunity to build a new political consensus centered around the permanent willingness of the Lebanese not to embark on any political and security adventure; moreover, Lebanese people are showing a strong sense of national unity. The political system has proven its resilience compared to all surrounding countries considered before as more politically stable than Lebanon.
Thank you again for this enjoyable gathering and we definitely look forward to further cementing existing cooperation and strengthening business and financial relations between Lebanese and British banking and financial sectors.
