BEIRUT – Lebanon's central bank, seeking to shore up battered confidence in the financial system amid the worst economic crisis in decades, said Monday that bank deposits are secure and it had the ability to preserve the stability of the pegged Lebanese pound.
In a televised news conference, Riad Salameh, the bank's governor, 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.
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 urgently needs a new government to enact emergency economic measures. The head of the powerful, Iran-backed Shiite group Hezbollah, said he wanted to avoid public discussion of closed-door talks over the new government.
A big part of Lebanon's economic crisis stems from a slowdown of capital inflows which has led to a scarcity of U.S. 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.
Salameh said the banks would meet immediately to review and implement the central bank's request. He said the central bank was allowing banks to borrow dollars without limits at 20% interest to secure depositors' needs on condition such funds were not sent abroad.
"The mechanism we put in place to protect the depositor is through preventing any bank from failing," he said.
In a further potential disruption to bank operations, a union representing bank staff urged them to strike, starting on Tuesday, because of security concerns stemming from protests at banks and depositors demanding withdrawal of their funds.