IMF team leaves Lebanon without agreement on bank restructuring strategy

The International Monetary Fund ended a staff visit to Lebanon on Friday without agreement on a strategy to restructure the country's banks, one of the main steps toward unlocking billions of dollars in assistance. The mission, which ran from November 10 to 13, made progress in clarifying the approaches under consideration by the central bank and the government - covering banking sector reform, the draft financial regulation law and the recovery of deposits - and in bringing them in line with international standards, the Fund said. But its mission chief, Ernesto Ramirez Rigo, said more work was needed to agree on a strategy that would restructure the sector effectively and durably. He said the mission looks forward to continuing talks with the authorities in the coming weeks and remains committed to helping Lebanon design and carry out a comprehensive reform programme.

Why talks are stuck

The central sticking point is a law on distributing losses in the banking sector, known as the financial gap law. The cabinet sent a draft to parliament in 2025, but the text is contested by the banking sector and political parties, and parliament has not voted on it. Reports said differences over how to estimate the losses and who should bear them have stalled negotiations. The law was among the conditions in the staff-level agreement Lebanon reached with the Fund in April 2022, which also called for a bank restructuring strategy that protects small depositors and limits the use of public money; the government of the time was slow to carry out the Fund's recommendations.

The IMF said the Bank Resolution Law should apply in all cases to support transparent and predictable bank resolution and liquidation. It said the Financial Stabilization and Deposits Recovery Law, once adopted, must respect the hierarchy of claims when allocating losses, protecting depositors as much as possible. Repayment criteria must also be consistent with the liquidity of the central bank and banks, public debt sustainability and restoration of the central bank's solvency.

Lebanese Finance Minister Yassin Jaber told a news conference that he hopes to make enough progress to sign a programme with the Fund in the first quarter of next year, and at the latest by its end. Lebanon's financial collapse began in late 2019: it wiped out the value of the currency, locked many depositors out of their savings, and the economy has become largely cash-based.