Syria - Banking and securities
Syria's financial services sector is underdeveloped. Besides the Central Bank, there are five banks in the country, all of which are state-run. The Central Bank, founded in 1956, is the bank of issue for currency, the financial agent of the government, and the cashier for the treasury. The Agricultural Bank makes loans to farmers at low interest; the Industrial Bank (nationalized in 1961), the People's Credit Bank and the Real Estate Bank (both founded in 1966), and the Commercial Bank of Syria (formed in 1967 by a merger of five nationalized commercial banks) make loans in their defined sectors. Unused Syrian pounds cannot be sold back to the Commercial Bank and the private exchange of foreign currencies and Syrian pounds is a criminal act. These strict currency controls are the largest disincentives to investment and foreign trade. So decrepit is the country's financial services sector that most Syrian businessmen and foreigners use banks in either Lebanon or Cyprus. Foreign diplomats in Damascus, for instance, use accounts in the Chtaura, in Lebanon's Beqaa valley, around one hour by car from Damascus.
Private sector groups have called for reforms such as private participation in banking, the creation of a stock exchange, and separation of the Central Bank of Syria from the government. Privatization of banks, which had been prohibited for 30 years, arrived in 2001 with new banking reform laws. The country's four banks are all owned by the government and interest rates are fixed by law. In March 2001 President Bashir issued Law 28 authorizing the establishment of private and joint venture banks, with foreigners permitted up to 49% ownership. To date none has been established but in January 2003 the government identified five banks to be licensed in the third quarter.
The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $37.4 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $62.0 billion. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 5%.