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 Economic Health
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Bankers tout stability of currency, capital markets despite crisis
Posted on: 6/18/2007 11:01:00 AM

Salameh says central bank has plenty of foreign reserves


The Lebanese pound and the country's capital market have managed again to cushion the negative impact of a political assassination and a growing tension between the government and the opposition, bankers said on Sunday. "The market is quiet with limited trading," Saad Andary, the adviser to the chairman of Bank of Beirut and the Arab Countries, told The Daily Star over the telephone.


He stressed that banks' deposits are almost completely intact despite the situation.


Lebanese banks experienced an outflow of deposits during last summer's war with israel, but most of these funds returned to the country once a cease-fire was established.


Bank assets are estimated at more than $73 billion, while customer deposits stand at $63 billion. Banks' profits in 2006 reached more than $665 million, an increase of more than 30 percent compared to 2005.


"There is not a single dollar transferred from our bank since the crisis started weeks ago," Andary said.


The Lebanese pound is still being sold at 1,507-1,515 against the US dollar, a rate that remained constant since 1994, when the Central Bank decided to intervene to keep the currency stable.


Central Bank Governor Riad Salameh assured the Association of Banks in Lebanon during a meeting on Saturday that he has taken the necessary measures to protect the pound. The governor said that the foreign currency reserves are ample and are able to contain any unforeseen pressure on the currency.


But some observers express fear that the Central Bank will have a tough choice to make if President Emile Lahoud forms another government, which would exacerbate the situation.


Salameh, according to a source, said that he will take the right decision at that time but declined to elaborate.


The source, who spoke on condition of anonymity, said that Salameh will carefully weigh his options if Lahoud forms another cabinet.


"The governor will take into consideration the interest of the country, banking sector and economy before making any judgment," the source said.


But the source said that bankers will support that government which is fully backed by the international community and "the government of Prime Minister Fouad Siniora meets this description."


Other bankers echoed similar confidence.


"If we look at the situation around us, I can say that there is nothing abnormal going on in the banking sector," Joe Sarrouh, the adviser to the chairman of Fransabank, told The Daily Star.


He added that there is a general feeling among investors and depositors that the situation will be back to normal in the near future.


Sarrouh pointed to the Lebanese capital market, which is widely seen as a gauge of the national economy.


"There was reasonable trading on Beirut Stock Exchange and the prices of Solidere shares are traded at $16.5," Sarrouh said.


He added that the capital market is the warning sign and not the local currency.


Solidere shares were traded at $14 few months ago but the stocks jumped by more than $2 after the giant real estate company disclosed a handsome profit in 2006.


Andary said that Lebanese banks are well regulated, highly liquid and have expanded to other countries to diversify sources of income.


He added that the balance of payments is on the surplus side thanks to the influx of capital and increased exports in the first three months of the year.


But the bankers underlined the need to speed up economic reforms this year. (Daily Star)


2007 Presidency of the Council of Ministers. All Rights Reserved.
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