Lebanon’s banks on ‘strike’ to protest ruling

BEIRUT — Lebanon’s battered commercial banks closed their doors to customers Tuesday in protest of a recent court ruling that forced one of the country’s largest banks to pay out two of its depositors their trapped savings in cash.

The Association of Banks in Lebanon, which lobbies for the banks, released a statement calling the action an “openended strike” and criticized the court ruling, claiming it was detrimental to all depositors, because the banks cannot afford to pay out everyone else’s savings in full.

The demise of the banks is part of Lebanon’s economic meltdown and unprecedented financial crisis that erupted in 2019 following years of corruption and mismanagement by the country’s rulers. Over three quarters of Lebanon’s population of 6 million has been plunged into poverty, and the Lebanese pound lost about 97% of its value against the dollar.

In an effort to avoid folding amid the crisis, the banks imposed informal capital controls, restricting cash withdrawals from accounts. Also, people with accounts in dollars are allowed only to withdraw small sums in Lebanese pounds, at an exchange rate far lower than that of the black market or the exchange rate used for buying and selling most goods.

This prompted some overseas depositors, locked out of their savings, to launch lawsuits to pressure banks to release their savings in full. In Lebanon, others opted to break into banks and forcefully take their own money, which led the banks to go on strike in September 2022 and close down amid security fears.

Last week, Lebanon’s Court of Cassation overturned the verdict in a 2022 case in favor of Fransabank, sued by two depositors demanding their money in cash. The ruling overturned the previous verdict, which allowed the bank to pay them with a check.

Cashing that check, however, would enable the depositors to retrieve their funds at a significant loss.

It was the first legal decision of its kind since the crisis.