Lebanon caps interest rates on deposits

due on US dollars deposited with it by Lebanese banks.

Economists said the decisions aimed to help the economy by lowering interest rates for borrowers that have crept higher as Lebanon sought to revive capital flows from abroad, and to ease pressure on the foreign currency reserves.

“Since you have capital controls, why not reduce the interest rates so the economy can benefit because the rates on loans from banks have increased to very high levels” Marwan Mikhael, head of research at Blominvest Bank, said.

The central bank circular said the decisions aimed to “preserve the public interest amid the exceptional circumstances

Cap on deposits made in Lebanese pound that the country is presently going through and to safeguard the interests of depositors by not decreasing their bank deposits”.

It said interest rates on deposits in foreign currencies should be capped at 5 per cent and the rate on Lebanese pound deposits capped at 8.5 per cent.

Interest due on US dollars deposited with the central bank by Lebanese banks would be paid half in US dollars and half in Lebanese pounds as an exceptional measure, the central bank said. The same applied to US dollar certificates of deposit issued by the central bank.

Application

The cap on interest rates would apply to all new deposits and those renewed from yesterday. It said banks should pay interest on foreign currency deposits half in the currency of the account and half in Lebanese pounds.

The measures would be valid for six months, it said.

All deposits made before today would remain subject to the agreement between the bank and the customer, it said.