Lebanon central bank says bank deposits are safe

Lebanon’s central bank, seeking to shore up battered confidence in the financial system amid the worst economic crisis in decades, said yesterday bank deposits are secure and it had the ability to preserve the stability of the pegged Lebanese pound. In a televised news conference, governor, Riad Salameh, said capital controls were not on the table because Lebanon depended on free movement of money, adding that the central bank had taken steps to safeguard deposits and there would be no haircut.

Already in deep economic turmoil, Lebanon has been plunged deeper into trouble since Oct. 17 when an unprecedented wave of protests against the ruling elite erupted across the country and prompted the resignation of Prime Minister Saad al-Hariri. Lebanon is in urgent need of a new government to enact emergency economic measures. The head of the powerful, Iran-backed Shi’ite group Hezbollah, said he wanted to avoid public discussion of closed-door talks over the new government, saying he wanted to leave the door open for an agreement.

Three senior sources said on Sunday the talks were still deadlocked. A big part of Lebanon’s economic crisis stems from a slowdown of capital inflows which has led to a scarcity of US dollars and spawned a black market where the Lebanese pound has weakened below its official pegged rate. Since reopening on Nov. 1 after a two-week closure, banks have been seeking to stave off capital flight by blocking most transfers abroad and imposing curbs on hard-currency withdrawals.

Referring to these restrictions, Salameh said the central bank had asked banks to review what he described as somewhat “conservative” steps taken because of instability that was prevailing at the time banks had reopened.