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Facts about the Lebanese Banking Sector

Main Banking & Financial Regulations

Main Banking & Financial Regulations
Since 1990, the Association of Banks in Lebanon publishes periodically within the ABL Dossiers, the "Main Banking and Financial Regulations" in both Arabic and French Languages.

The main banking and financial regulations promulgated since the second half of the last century are:
  • Banking secrecy law promulgated on September 3, 1956: Managers and employees of the banking establishments are bound to absolute secrecy in favor of the bank’s clients and may not disclose to anyone, whether a private individual or an administrative, military or judicial authority, the names of clients, their assets and facts concerning them; Banks are authorized to open code number deposit accounts for their clients. However, law no. 318/2001 (replaced by law no. 44/2005) gave the exclusive right for the Special Investigation Commission to decide the lifting of the banking secrecy on accounts opened with banks or financial institutions and suspected to have been used for money-laundering and financing of terrorism purposes. 
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  • Law authorising the opening of joint account promulgated on December 19, 1961: Banks may open for their clients a joint account which operates upon the single signature of one of the holders of the said account. In case of death of one of the holders of the joint account, the one or several joint holders dispose of the said account freely.

  • The Code of money and credit promulgated by decree n°13513 of 8/1/1963: This law is the main regulation of banking and financial system. It covers the regulation of money, the Central Bank of Lebanon's role, and functions, the banks activities in addition to the activities of the professions linked up to the banking profession.
  • Law no. 62/66 of 9/6/1966: the exceptional measures taken concerning lending operations and guarantying banking liquidity are ratified.  
  • Law n°28/67: Amendment of some provisions of the Code of money and credit with supplemental regulations covering banks. Set up in the Central Bank of Lebanon (BDL) of the Higher Banking Commission and the Banking Control Commission, establishment of the National Deposit Guarantee Institution. Article 45 of this law suspended for a period of five years (one time renewable period) new banks licenses.This license suspension was extended for an additional five years by decree n° 3321/72.

  • Special Regulations Covering Defaulting Banks and the necessary measures that should be taken:  Law n°2/67, decree n°7739/67, Legislative Decree n°8/67, law promulgated by decree n°1663/1979, law n°110/1991, law n°628/2004, and all their amendments. 
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    • Decree n° 7977/1967 and it's amendment by decree n° 9471/1968: Setting the rules to be followed in front of the High Banking Committee. 

     

  • Decree n°11564/1968: Ratification of the National Deposit Guarantee Institution’s Bylaws.

  • Decree n°1983/1971: Regulation of banks’ auditors.

  • Law promulgated by decree n°6102/1973: Amendment of some provisions of the Code of money and credit, notably articles 76,102,105,152,153, 186 of this law. These amendments aimed in particular to the removal of unjustified restrictions that impede the exercise of profession or tighten the areas of investment. The new article 174 specify that the Central Bank of Lebanon (BDL) must take into account the opinion of Association of Banks when laying down overall banking regulations.

  • Law creating a banking free zone promulgated by decree n°9976/1975 and the decree n° 29/1977 concerning the special regulations of this free zone: The abovementioned law and decree exempted the deposits and various banking commitments in foreign currencies relating to non residents from the deposit guarantee tax and from the reserve requirements and from the income tax on deposits’ interests. But article 51 of the Law n° 497/2003 (2003 Budget law) canceled the last exemption.

  • Decree -law n°47/1977 and Decree -law n°130/1977: organized the relations between banks and their debtors on old debt, the law n°8/81: law of installment debt traders affected because of the war, and the decree -law n°131/1977 on granting facilities, guaranteed by the government, to the reconstruction of the industrial and tourism and hospital sectors.

  • Legislative Decree n°41/1977: Specific Rules Covering the Loss of Securities “to Holder”.

  • Law promulgated by decree n°14/1977: Establishment of the housing Bank “Banque de l’Habitat SAL”, the decree n°5738/1994: Ratification of “Banque de l’Habitat “ bylaws.

  • Decree n° 707 /77: Identification of accounting basics used to calculate the annual fees due to National Deposit Guarantee Institution.

  • Decree -Law n°77/1977: Amendment of some provisions of the Code of money and credit. The establishment of any Lebanese or foreign bank required the authorization of the Central Bank of Lebanon (BDL). The latter shall give or no this authorization regarding the public interest. The new required minimal capital is 15 millions L.L..

  • Decree -Law n°83/1977: Amendment of the paragraph 8 of article 7 of the Decree -Law n°144/1959 (income tax law). Banks are authorized as of the 1977 operations, to set aside provisions to meet loss of doubtful debts and after receiving the approval of the Banking Control Commission. The law n°583/2004 (2001 budget law) authorize the financial institutions to constitute the said provision as of the 2004 operations.

  • Law promulgated by decree n°5439/1982: Tax exemption and special rules connected to the development of the Lebanese financial market. The certificate of deposit of the banks and the bonds issued by banks and anonymous companies are exempted from the fiscal stamp duty and from the income tax. But article 51 of the Law  n° 497/2003 (2003 Budget law) canceled the last exemption.

  • Decree - Law No. 45 of 24/6/1983 with amendments: Aiming to establish the Statutes of holding companies.

  • Decree - Law No. 46 of 24/6/1983 with amendments: Aiming to establish the Statutes of offshore companies, and its implementing decree No. 2083 of 29/5/2009.

    Decree - Law n°50/1983: Regulation of specialized banks activities. Their object must be exclusively the utilization of their resources in medium and long term credit operations for direct investment or participation, for purchase and sales of financial securities, and for issuing guarantees. The aggregate long and medium terms advances as well as participation in Lebanese pounds for the public sector and mixed Lebanese companies may not be under 10% of all their engagements in Lebanese pounds (50% before 1996).

  • Law n°42/1986: Prohibiting the sale of all Bank of Lebanon gold reserve, only by a legislative text of the Parliament.

  • Law n°99/1991: The Central Bank of Lebanon (BDL) determines the required minimal capital for any Lebanese or foreign bank which has obtained the approval of being established after the promulgation of this law.

  • Law n°110/1991: Reform of the banking sector. This law aim to treat and close the file of banks in difficulty or be considered in a state of suspension of payment (defaulting banks) and the number of which increased because of the war and the bad economic situation.

  • Law n°192/1993: Facilitating the mergers and acquisition of banks. This law has helped to address the situation of banks in difficulty but with sound management, and maintained the rights of depositors and employees and preserved the stability of the market (through incentives and soft loans granted to the acquiring bank ).The decree n°1423 of 23 February 2009 put regulations on the mechanism and criteria/standards for soft loans granted in accordance with the provisions of Article 6 of the above mentioned law n° 192.

  • Law n°520/1996: Developing the financial market and the fiduciary contracts. Regulation of the fiduciary operations in order to protect the rights of the “fiduciant”. Banks are authorized to make fiduciary operations which contribute to develop their role as universal banks.

  • Law n°543/1996: Banks exemption from some taxes regarding housing loans.

  • Law n°24/1999: Authorization for the National Deposit Guarantee Institution to participate in a Lebanese Joint Stock Corporation named “Kafalat” that helps small and medium size enterprises (SME) by providing loans guarantees.

  • Law n°105/1999: Authorization to import, export and trade with gold and any other precious metals.

  • Law n°133/1999: Expanding the role of the Central Bank of Lebanon (BDL) defined in article 70 of the Code of Money and Credit to include the development and regulation of the payment systems, especially regarding ATMs and payment cards, the transfer payments, including electronic transfers; and the development and regulation of clearing and settlement operations related to payment systems and financial instruments.

  • Law n°138/1999: Established “The Arab Clearing Corporation”. This Corporation execute clearing operations between the Arab financial markets, or between the Arab and the global financial markets, and it is Beirut-based.

  • Law n°139/1999: Established “The Central Securities Depository- Midclear”. An “Sal” or Lebanese joint stock company with the Central Bank of Lebanon (BDL) as main shareholder, that carry out exclusively the role of the central depository and settlement and clearing of f financial instruments and securities included in the regulatory financial markets in Lebanon.

  • Law n°154/1999: Illicit Enrichment

  • Law n°159/1999: Setting regulation for the securities account: Banks, financial institutions and financial intermediary institutions may open in their establishments, individual and joint accounts, for financial instruments and bearer securities.

  • Law n°160/1999: Setting regulation for the leasing operations. The operations of the leasing of equipment, and machines of various types that were bought from the lessor with a view to lease them with the retention of ownership provided, giving the lessee the right to owned them by paying the price agreed after taking premiums rent allowances into account, even partially.

  • Law n°234/2000: Regulation of Financial Intermediary Institutions. The activities of Financial Intermediary Institutions include the operations that they undertake for their own accounts or on behalf of their clients on options, derivatives and structured financial instruments concerning stocks, financial papers, currencies, commodities, and portfolio management operations.

  • Law n°308 dated 4/3/2001: Bank Share Issuing and Trading. This law united the stocks and canceled the disparity between banks concerning the Law of foreign ownership, in return this law put limits relating to the acquisition of the core capital that control the main decisions in the bank.

  • Law n°318/2001: Fighting Money Laundering This law kept the Lebanese banking sector away from money laundering operations, and maintained, on the other hand, the banking secrecy on the funds deposited with banks in Lebanon. This law has led to the lifting of the name of Lebanon on the list of countries not cooperating with the FATF Financial Action Task Force". Law n°32/2008: Expanding the powers of the Special Investigation Commission established pursuant to Law No 318 of April 20, 2001, on Fighting Money Laundering.

  • Law n°347/2001: Regulation of the Exchange Institutions.

  • Law n°430/2002: Public Debt Account Creation and Reduction Earnings of the privatization of a public utility are transferred to this account, also loans, grants and assistance that are accorded to the Public debt servicing and to the debt reduction and restructuring.

  • Law n°497/2003: Article 51 of 2003 Budget law Amendment to section III of the Income Tax Law and to impose interests and revenues of all creditor accounts and deposits and other banking commitments in any currency, including those belonging to non-residents, to a 5% tax. The interests of certificates of deposit, bonds and treasury bills are also subject to the tax. However, banks' deposits in the Central Bank (BDL) are not subject to the tax. If these interests and revenues enter into the profits of banking and financial institutions, they remain subject to the 5% tax, and the amount of this tax will be deducted of the taxable revenues of these institutions. This provisions was amended under Law n° 64/2018 and its amendments whereas this tax increased from 5% to 7% and some exceptions were abolished. 

  • Decision of ministry of finance n°403/1/2003: Implementation of Article 51 of Law n° 497/2003.
    The minutes of the application of tax law 5%. It was pointed out in that decision, that deposits between banks are exempted from this tax in addition to banking deposits with the Central Bank of Lebanon (BDL).

  • Law n° 575/2004: The Establishment of Islamic Banks in Lebanon Despite the possibility of meeting Islamic banking operations through the Lebanese legislation (in particular Law n° 520/96 referred to above), the importance of a law on Islamic banks that organize the work of these banks, was in terms of the growing activity of these banks in the world and of taking advantage of the big financial Islamic flows.

  • Law n°628/2004: The appointment of the National Institute for the Guarantee of Bank Deposits for the mission of monitoring the liquidation operation of the defaulting banks.

  • Law n°705/2005: Assets Securitization Lead to create liquidity in transforming illiquid assets into securities.

  • Law n°706/2005: Collective Investment Schemes in Securities and Other Financial Instruments, which constitute the channels of additional instruments to attract capital and savings needed by the Lebanese economy. Financial instruments that constitute the channels of additional tools to attract capital and savings needed by the Lebanese economy.    

  • Law n°44 of 14/11/2008 with amendments: Aiming to unify and simplify Tax procedures, and its implementing decree No. 2488 of 3/7/2009.

  • Law n° 160 dated 8/17/2011: Prohibiting insider trading made on the basis of material non-public information.

  • Law n°161 dated 8/17/2011: Financial Markets, establishment of The Financial Markets Commission which will regulate and monitor the functioning of the financial markets and its participants, and provide licensing and registration.

  • Law n° 42 dated 11/24/2015: on Declaring the Cross-Border Transportation of Money.

  • Law n° 43 dated 11/24/2015: on Exchange of Tax Information.

  • Law n° 44 dated 11/24/2015: on Fighting Money Laundering and Terrorist Financing. The draft law required by Decree N° 8200 of May 24, 2012 (amending Law n° 318 of April 20, 2001 on Fighting Money Laundering is adopted.

  • Law n° 53 dated 11/24/2015: on Authorizing the Lebanese Government to join the International Convention for the Suppression of the Financing of Terrorism that was signed in New York on December 9, 1999.

  • Law n° 55 dated 10/27/2016: on Exchange of Information for Taxation Purposes: provide information requested by foreign authorities on residents in their countries in accordance with the provisions of international agreements signed with Lebanon, including the multilateral agreement for technical cooperation in the field of taxation MAC. Its implementing decree n° 1022 of 7/7/2017 with its amendments: the procedures concerning the declaration as well as the automatic exchange of information for tax purposes, and this is in accordance with the Common Standard for the automatic exchange of information adopted by the OECD. 

  • Law n° 60 dated 10/27/2016: on Amendment of Clause 1 of article 23, article 29 and article 32 and clause 1 of article 107 of Law n° 44 dated 11/11/2008 (Tax Procedures Law - TPL - and its amendments).

  • Law n° 74 dated 10/27/2016: on Defining Tax Obligations for individuals carrying out trustee activities.

  • Law n° 75 dated 10/27/2016: on the abolition of bearer or on hold shares and promissory notes. Shareholding companies may only issue nominal shares, in addition they have to replace the bearer shares issued before the issuance of this law with nominal shares. 

  • Law n° 77 dated 10/27/2016: on the amendment of Article 316 bis of the Penal Code relating to the financing of terrorism and terrorist operations, directly or indirectly.  In addition to broadening the concept of terrorist financing and its operations to related operations such as planning, recruitment, collaboration, etc. 
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  • Law no. 48 dated 9/7/2017: regulating the partnership between the two public and private sectors. Are subject to the provisions of this law, joint projects stipulated in the laws governing the sectors of electricity, telecommunications and air transport etc. 
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  • Article 15 of Law no. 64 of 20/10/2017: the Corporate income tax applied on the profits of limited companies (joint-stock companies (SAL), limited liabilities companies (SARL) and limited partnership by shares (SCA)) is increased from 15% to 17%.
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  • Article 17 of Law no. 64: dated 10/20/2017: Amendment of article 51 of Law no. 497/2003 (budget law 2003), and raising the tax rate from 5% to 7% on interest and revenue of all creditor accounts, deposits and all bank liabilities in any currency, including those of non-residents. Interest on all certificates of deposit and debt securities and treasury bills are also subject to this tax of 7%. In addition, these interests which enter into the profits of the banks remain subject to the 7% tax and the amount of this tax will be regarded as being a deductible charge of he taxable revenues. This article was amended by Article 36 of Law 79 dated 4/18/2018 (Budget law 2018), which exempted interbank deposits from this tax. 
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  • Article 49 of Law no. 66 dated 11/3/2017 (Budget law 2017): companies may carry out an exceptional revaluation of the elements of their fixed assets (including shares, debt securities, securities, shares, property - funds and other real estate assets) to correct the effects of monetary inflation on the value of these assets. 50% of the value of this revaluation can be accepted in the banks' tier two capital. (BDL Circular no. 44/1998) 
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  • Decision of the Ministry of Finance no. 514/1 of 17/4/2018: set the terms of application of the submentioned article 49
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  • Decision of the Ministry of Finance no. 1504/1 dated 12/22/2017: Minutes of application of Article 51 of Law no. 497/2003 as amended by article 15 of Law no. 64/2017 and relating to the 7% tax on the interest and income of all bank commitments. It was pointed out in this decision, that bank deposits with the Central Bank (BDL) are not exempt from this tax. While Article 36 of Law 79 (Budget Law 2018) clearly exempted deposits from this tax. 
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  • Law no. 85 dated 10/10/2018: amendment of certain provisions of Decree Law no. 46/1983 on the status of offshore companies, which allowed a single moral or physical person (single or single member) to create, as for Lebanese joint-stock companies with multiple shareholders, an offshore company. 
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  • Law no. 81 dated 10/10/2018 : on electronic transactions and personal data. Legal provisions governing electronic bonds and the electronic signature and the protection and security criteria and their validation to be accepted as a means of proof. this law governs electronic commerce and contracts, including electronic money transfer payment transactions, bank cards and electronic checks. It also governs personal data to protect their confidentiality. 
    Last Updated on September 13, 2019