Summary: Economic expert Mohamed Fahili said in an audio interview with Independent Arabia that Lebanese citizens should know that the banking sector did not completely stop operating, but rather suffered a major shock as a result of the banking crisis that began in October 2019.

More than six years after the financial crisis that shook Lebanon and plunged the banking sector into its worst crisis since its inception, indicators suggest a gradual return of some banking services to the market. Several banks have restored part of their activity, expanded their digital services, and maintained relationships with correspondent banks, as the Lebanese economy seeks to restore the minimum role of the financial sector.

But the question that arises today is: Have Lebanese banks truly returned to their previous activity of granting loans and credit facilities, or is the recovery still limited to restricted services?

Economic expert Mohamed Fahili said in an audio interview with Independent Arabia that Lebanese citizens should know that the banking sector did not completely stop operating, but suffered a major shock due to the banking crisis that began in October 2019. The signs of this crisis became clear, then gradually worsened until reaching its peak with the decision of Prime Minister Hassan Diab's government to stop servicing the debt.

On the other hand, it must be noted that cross-border banking operations continued, as some banks were able to continue providing them, especially for financing Lebanese imports and exports. He added: 'It is true that money transfer companies saw notable activity in recent years, but they remain limited by financial ceilings that do not allow them to provide all cross-border banking operations, unlike what commercial banks do. This is extremely important, because the saying that there is no economy without banks and no economy without banking services remains true.'

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Fahili added: 'However, the trust crisis that hit Lebanese commercial banks was not only due to their own performance, but was largely influenced by the performance of the political class, embodied in the government's decision to stop debt servicing, despite its prior knowledge of the dangerous repercussions of such a decision. This had a significant negative impact on the work of the Lebanese banking sector. Furthermore, the performance of the political authority was one of the reasons that led Lebanon to the FATF grey list. Even the acting governor of the Central Bank of Lebanon, Dr. Wassim Mansouri, acknowledged that Lebanese banks maintained good relations with correspondent banks and were able to secure cross-border banking operations, despite all the pressures exerted on them by entities and individuals within Lebanon.'

These pressures were not limited to that, according to Fahili, as Lebanese banks continued to maintain their relationships with correspondent banks, noting that most of these banks are European. These relationships contributed to the continued provision of cross-border banking services to meet the needs of Lebanese citizens, both on a personal level, such as transferring money to cover children's education expenses, and on a commercial level, to finance import and export operations during the crisis years.

Digital Banking Services

Recently, however, the monetary scene has seen a kind of stability in terms of the dollar exchange rate and banking activity, and a return of some order to the Lebanese economy. Several banks have started offering banking services based on digital technology. In this context, the economic expert believes that 'the banks offering these services have the ability and potential to return to serving the economy. But I see that there are pressures exerted on them by the political authority under the pretext that we want solutions for all banks, not just some. We note that some banks have started offering services based on digital technology and providing digital payment methods. This indicates the banking sector's ability to adapt to economic and security changes, and the ability of part of it to overcome its crisis.'

He continued: 'Furthermore, the state, through the draft laws it presented, acknowledged that there are banks capable of returning to serve the economy, others that need support, and banks that must head towards liquidation. This is what we are witnessing today in the banking sector.'

He concluded: 'The banking sector is not waiting for the state to decide its future, but continues its work. Nevertheless, laws remain necessary because they provide the legal cover for the return of order to the banking sector, especially regarding the provision of loans and credit facilities, as the credit process is still limited and restricted due to the absence of necessary laws.'