Lebanese banks to suspend open-ended strike at PM's request

Lebanon’s struggling banks have decided to suspend their strike for one week, following a request by caretaker Prime Minister Najib Mikati

Lebanon (Copyright 2022 The Associated Press. All rights reserved)

Lebanon’s struggling banks on Friday decided to suspend their strike, which started earlier this month, for one week after caretaker Prime Minister Najib Mikati asked them to do so.

The Association of Banks in Lebanon did not give further details about the suspension. The strike began Feb. 7 in protest of a recent court ruling that forced one of the country’s largest banks to pay out two of its depositors their trapped savings in cash.

The decision comes as many Lebanese, including civil servants, are expecting to get their monthly pay. Salaries are typically paid out toward the end of the month, through bank accounts.

Lebanon’s banks have been hard-hit by the country’s historic economic meltdown that began in October 2019 and have since imposed informal capital controls under which depositors have been able to withdraw only small amounts of their savings at an exchange rate far lower than the one used on the market.

The economic crisis — rooted in decades of corruption and mismanagement by the country’s political class — has left more than three quarters of Lebanon’s population of 6 million in poverty. The Lebanese pound has lost 97% of its value against the dollar.

The informal capital controls have prompted some overseas depositors, locked out of their savings, to launch lawsuits overseas and in Lebnanon to pressure banks to release their savings in full. In Lebanon, some depositors opted to break into banks, armed, and forced cashiers to hand over their own money. Several such armed actions last year prompted the banks to go on strike in September 2022 and close down amid security fears for a week.

Earlier this month, Lebanon’s Court of Cassation overturned a 2022 verdict in favor of Fransabank, sued by two depositors demanding their money in cash. The ruling threw out the previous verdict, which allowed the bank to pay them with a check. That would not have allowed them to retrieve their money in full since they would have had to deposit the check in a bank account, where the money would get stuck all over again.

In mid-February, angry Lebanese smashed windows and set tires on fire outside two of the country’s biggest banks in the capital, Beirut, as the value of the Lebanese pound hit a new low.

Despite the economic meltdown, Lebanese authorities have not implemented reforms demanded by the international community in order to release billions of dollars in loans and grants. The International Monetary Fund has criticized Lebanon for its sluggish progress on the reforms since talks between the government and the IMF began in May 2020.

At the same time, banks have refused attempts to make their shareholders assume responsibility for the crisis — as envisaged under a proposed economic recovery plan — and have insisted that the government and their own depositors share the biggest burden for the losses.