The report “ABL: Lebanon’s Deposit Recovery Challenge: $29 Billion at Risk amid Banking Liquidation Concerns,” issued by BLOM BANK s.a.l. Research Department on October 20, 2026, examines Lebanon’s proposed Financial Regularization and Deposit Recovery Law in the context of the already enacted Bank Restructuring Law, relaying the warnings raised by Dr. Fadi Khalaf, Secretary General of the Association of Banks in Lebanon (ABL), in his September 2026 editorial “Will 550,000 Bank Accounts Worth $29 Billion Be Sent into Liquidation?”. It focuses on the core policy challenge of who bears the losses, how repayments will be financed, and whether sufficient liquidity exists to meet promised schedules. The report’s purpose is to assess the risks and urge a deposit recovery framework grounded in identifiable funding sources, credible timelines, protection of viable banks, and clearly defined roles for the state and Banque du Liban to restore confidence.
Key Insights
- Technical studies by international advisers indicate that applying the government’s draft Financial Regularization and Deposit Recovery Law without rebalancing burden-sharing and funding sources could liquidate banks holding approximately 550,000 accounts and more than $29 billion in deposits, and liquidation alone would not ensure deposit protection in the absence of an institution to assume obligations.
- The National Deposit Insurance Corporation lacks the financial capacity to cover deposits of this magnitude, and relying on asset sales from liquidated banks would be slow, administratively costly, and prone to value losses, underscoring the gap between theoretical asset values and realizable liquidity and exposing depositors to years of uncertainty and partial recovery.
- Preserving the liquidity of viable banks is essential so they can rebuild capital, regain depositor confidence, attract fresh capital and liquidity, resume lending, and support economic recovery, rather than being overburdened by repayments that exceed their capacity.
- Repayment schedules set in law are not credible unless anchored in a comprehensive assessment of actual liquidity across the Lebanese state, Banque du Liban (BDL), and commercial banks, echoing Ibrahim Kanaan, Chairman of Parliament’s Finance and Budget Committee, who on June 11, 2026 questioned how even the first $100,000 would be funded and warned of another default.
- Accurate and fair loss measurement and allocation are required—avoiding double counting on deposits under review, clarifying how BDL will finance its share given concerns about using mandatory reserves and the resources that would remain once they are depleted, and committing the state to tangible resources, transparent mechanisms, and a realistic timetable—so that burden sharing is sustainable and confidence can be restored.
