Lebanon - Banking and securities

The Bank of Lebanon, established on 1 April 1964, is now the sole bank of issue. Its powers to regulate and control commercial banks and other institutions and to implement monetary policy were expanded by amendments to the Code of Money and Credit promulgated in October 1973. To encourage the movement and deposit of foreign capital in Lebanon, a bank secrecy law of 1956 forbids banks to disclose details of a client's business even to judicial authorities. There are no restrictions on currency conversions and transfers, and no foreign exchange controls effect trading.

In the late 1990s, the banking sector was undergoing a period of expansion and consolidation with a number of banks listed on the Beirut Stock Exchange. In 1998, over 70 banks were operating in Lebanon with total assets of around $31 billion. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $1.6 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $35.1 billion. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 20%.

The Beirut Stock Exchange was officially opened in 1952 as a center in which the few available company shares could be traded. The exchange closed during the civil war but reopened in 1979; however, there was little trading in stock during 1980-81. In 1982, Beirut was chosen as the headquarters of the Arab Stock Exchange Union, reflecting Lebanon's continuing importance as financial center of the Middle East.

In September 1995, the Beirut Stock Exchange reopened after a 12-year closure. Trading began in January 1996, but with just three companies listed, all of them producers of cement or construction material. A fourth company joined in mid-1996. A secondary market was opened to trade shares in the private property company, Solidere. Solidere is developing the destroyed business heart of Beirut. With the secondary market considerably more successful than the stock exchange, plans to list Solidere on the latter have, for the moment, been shelved. In 1997, however, Solidere moved its shares from the secondary market to the Beirut Stock Exchange. An important reason for the move was a plan to cross-list Solidere shares on the Kuwait Stock Exchange. Kuwait said it would do so only if shares were traded on the official bourse rather than on the secondary market. The Lebanese Stock Exchange authority signed an agreement to cross-list shares not only with Kuwait but also with Egypt from early in 1997. Solidere has a 115 million-125 million GDR (global depository receipt) to be listed on the London Stock Exchange.

In 2001, the stock market remained sluggish, with only 12 companies, including Solidere, listed. Market capitalization was at around $1.2 billion.