Dr. Joseph Torbey
Chairman - Association of Banks in Lebanon
Chairman - Union of Arab Banks
Chairman General Manager - Crédit Libanais SAL
Planet Lebanon 2003- Brazil
Speech - The Lebanese Banking Industry
09/06/03
Mr. President, Excellencies, ladies and gentlemen,
I feel honored to be present here today with you in this beautiful city of Sao Paolo, and would like to express my appreciation to the hosts and sponsors of this Conference, for their diligent efforts to make this occasion a truly successful event.
We the Association of Banks in Lebanon and the Union of Arab Banks, two institutions that I have the honor to preside, feel we have a great responsibility to carry forward our institutions to fulfill our obligations to help our economies attain prosperity and advancement. In that context, one major challenge that always confronts us is to distill lessons from past and recent crises.
Since peace in Lebanon was resumed in 1991, the Lebanese banking sector has engaged in a process of modernization and restructuring to adapt to a continually changing regional and international environment.
I will start with the banking expansion during the last ten years. The number of mergers and acquisitions between banks has reached 29 operations since 1992. The number of banks in Lebanon is currently 60 of which 8 medium to long term credit banks and 52 commercial banks. Worth signaling also that the Lebanese banking sector has 787 bank branches distributed over the Lebanese territory and that would constitute on average 2 branches per 10000 inhabitants. Over the last few years banks were heavily involved in modernizing their banking operations and integrating into their work, particularly their payment systems, the latest technology and information systems. In December 2002, the number of Automatic Teller Machines (ATMs) in operation was 686, the number of Point of Sales terminals(POS) and the number of payment cards in circulation were 6606 and 611829 respectively for a population of around 4.0 million. Many Lebanese banks also offer electronic banking services for residents and non-residents alike.
The ratio of total assets of banks to GDP in Lebanon is relatively high when compared to any other country worldwide. This ratio was 297% in 2002 and 285% in 2001 for Lebanon compared, for example, to 64% for the United States (2001), 145% for Bahrain (2001) and 125% for Kuwait (2001) and 230% for Switzerland.
The Lebanese banking sector is characterized by a high international openness. This fact is supported by the absence of restrictions on international movement of capital from and to Lebanon and on foreign exchange transactions. Lebanese laws also do not discriminate neither between nationals and foreigners and nor between foreigners of different countries and that is in conformity with the GATS agreements on the Liberalization of trade in financial services. The Lebanese banking sector interacts efficiently with the Lebanese Diaspora and serves its interests and plays an important role in the Arab markets. Commercial banks in Lebanon involve 42 Lebanese banks and 10 foreign bank branches. In addition 19 foreign banks have a representation office in Lebanon. On the other side, 18 Lebanese banks have direct implantations in 14 countries through 52 different legal banking entities.
Between the end of 1992 and the end of April 2003 major improvements occurred on the consolidated balance sheet of Lebanese commercial banks. Total assets increased from around USD 8 billion to USD 54.7 billion, deposits of resident and non-resident private sector increased from USD 6.6 billion to USD 44.1 billion and bank capital jumped from less than USD 0.2 billion to around USD 3.5 billion. This reflects the significant ability of banks operating in Lebanon to attract deposits from local and foreign markets mainly from Lebanese living in some Arabs countries. It reflects also the communities’ efforts undertaken by banks to maintain and improve their soundness and competitiveness and to comply with international bank capital requirements.
These developments allowed the banking system to meet the larger rising financing requirements of the Lebanese private and public sectors particularly during the phase of the infrastructure and the rehabilitation of the productive capacity. Therefore, banks play a dominant role in the financing of the Lebanese economy and contribute to its growth. At the end of April 2003, claims on private and public sectors reached about USD 32 billion out of USD 55 billion for total assets (around 58%) while Lebanese banks maintained a high level of liquidity, mainly in foreign currencies, as reserves and foreign assets, in the amount of USD 21 billion (around 38% of total assets).
Over the last years, the regulatory and supervisory authorities, the banks and the Bankers Association made huge efforts to offer for the private sector medium and long term financing particularly directed to the productive sectors. This was made possible through credit lines from international financial institutions and borrowing on the international markets in addition to other special financing schemes. In this respect, many banks benefited from stable long term sources of funds (7 to 12 years maturity) from the International Financial Corporation (IFC) and the European Investment Bank (EIB). Banks were also able to issue and sell across border Certificates of Deposits (CDs), bonds, subordinated notes and Global Depository Receipts (GDRs) listed on the international stock exchanges. Their outstanding value exceeded USD 1.23 billion at the end of April 2003. We need to mention that banks in Lebanon and the country as a whole have always respected their international debt commitments. They never defaulted on their individual or corporate clients, residents or non residents.
Banks in Lebanon performed relatively well over the last three years in terms of return on average assets and equity, liquidity, solvency and cost to income. The return on assets and equity averaged 0.8% and 12% respectively, these ratios are in line with those reported by top 100 international banks. The capital adequacy ratio exceeds actually in Lebanon 18%, much above the minimum 8% required by the Basle Committee of the Bank for International Settlements (BIS). A tripartite commission was established lately to start preparing for the implementation of the new Basel II Accord in Lebanon.
The progress realized by the Lebanese banking sector over the last ten years could not have been possible without the appropriate and strong bank regulation and supervision undertaken by the Central Bank of Lebanon and the Banking Control Commission and the close cooperation of the Association of Banks in Lebanon. The list of bank regulatory and legislative reforms is long and reflects the voluntary willingness of banks and the concerned authorities to restructure and modernize the banking sector and accompany the changes taking place in the international economic and financial environment. One of these reforms is the adoption of a unified regulation for the acquisition of bank shares without any discrimination between Lebanese and non Lebanese and between residents and non residents. This regulation encourages the trading of shares in the stock exchange and introduces new financial products such as preferential shares and stock options.
The internal control at banks has been reinforced with the creation of internal audit units and the establishment of internal control regulations that are in conformity with the guidelines issued by the Basle Committee of the Bank for International Settlements (BIS).
A law on money laundering was enacted by the Lebanese parliament in April 2001, following the strong efforts undertaken by the Lebanese monetary and financial authorities with the cooperation of the Association of Banks in Lebanon. This law aims at preventing money laundering and allows the efficient cooperation with the international community on this issue without breaching the bank secrecy law in application since 1956. The seriousness and rapidness in the implementation of this anti-money laundry regulation by the involved parties, was recognized by a delegation of the Financial Action Task Force (FATF) during their visit to Lebanon in June 2002, and it permitted the delisting of Lebanon from the list of non cooperating countries (NCCT'S).
The Lebanese banking sector makes therefore all the necessary efforts to address efficiently the financing needs of the domestic economy and to provide the best services for our clients in Lebanon and abroad who are becoming more demanding with respect to high quality - low cost banking and financial services. Because of the globalization trend and the traditional openness of domestic markets, the Lebanese banking sector, exposed to international competition, responded by the ongoing institutional and organizational restructuring. Therefore, we, as banks, are in a good position to operate on both domestic and regional levels.
In conclusion, the Lebanese banking sector is providing today to local and international investors interested in our national or regional markets all required financial and banking services in an efficient and cost effective way. Our Bankers will play their diversified role as financiers, catalysts, consultants and partners:
- Financier as the banking sector still the principal source of financing of the Lebanese economy;
- Catalyst because of our credibility, and our active engagement in the financing operations of the economy attract and incite local and international investors to get involved and invest in the economy in their turn;
- Consultant due to our capability to provide to domestic and foreign investors a reliable and accurate assessment of investment opportunities in Lebanon and valuable information on the financial standing and the soundness of potential local business partners;
- Partner as the capital of banks in Lebanon is open for external participation without any discrimination, directly or through portfolio investments.
Finally, we are ready to support any Brazilian-Lebanese joint-venture in Lebanon or in the Middle East Region as a whole including in the Iraqi market which is well known to the Lebanese banking and business community. We always had and still have very good business relationship with the Iraqi people and markets.
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Characteristics of the Lebanese banking sector
Branch expansion
Bank modernization
Openness to foreign markets
Banking activity and the financing of the economy
Growth rate of banking activity
Evolution of bank capital
Evolution of deposits
Evolution of credit
Performance of banks
Profitability
Liquidity
Solvency
Banking legislation
Regulation for the ownership of banks
Internal control of banks
Medium and long term credit
Adoption of international accounting norms
Participation of banks in combating money laundering
Conclusion
PRESENCE OF LEBANESE BANKS ABROAD
2002/2003 (April 2003)
Country City Legal entity Name of bank
Syria Damascus Branch - FRANSABANK S.A.L.
France Paris Sister bank affiliated with Fransabank s.a.l. - FRANSABANK (France) S.A.
E.A.U. Abu-Dhabi Branch - B.L.C. BANK S.A.L.
E.A.U. Dubai Branch
E.A.U. Sharjah Branch
E.A.U. Ras-el-khaimah Branch
France Paris Affiliated bank with B.L.C. Bank S.A.L. - B.L.C. BANK (France) S.A.
France Paris Representative office - Near East Commercial Bank SAL
United Kingdom London Branch - BLOM BANK S.A.L.
E.A.U. Dubai Branch
E.A.U. Sharjah Branch
Sultanate of Oman Muscat Branch
Syria Damascus Branch
Cyprus Limassol International Banking Unit - BLOM BANK S.A.L.
France Paris Affiliated bank with BLOM BANK s.a.l. - BANORABE S.A.
Switzerland Geneva Affiliated bank with BLOM BANK s.a.l. - BANQUE BANORIENT (Switzerland) SA
Cyprus
Nicosia Sister bank of Société
Générale de Banque au Liban S.A.L. - SOCIETE GENERALE CYPRUS LTD
Jordan
Amman Affiliated bank with Société
Générale de Banque au Liban S.A.L. - MEIB - MIDDLE EAST INVESTMENT - BANK – SOCIETE GENERALE GROUP
Syria Damascus Branch - SOCIETE GENERALE DE BANQUE AU
LIBAN S.A.L.
Switzerland
Geneva Subsidiary bank of Banque de la Méditerranée S.A.L. - BANQUE DE LA MEDITERRANEE
(Switzerland) S.A.L.
France Paris Affiliated bank with Banque Saradar S.A.L. - BANQUE SARADAR (France) S.A.
France Paris Representative office - BANQUE SARADAR S.A.L.
Country City Legal entity Name of bank
Cyprus Limassol International Banking Unit - BBAC S.A.L
Syria Damascus Branch - BBAC S.A.L
United Kingdom London (West End) Branch - BANK OF BEIRUT S.A.L
Cyprus Limassol International Banking Unit - BANK OF BEIRUT S.A.L
E.A.U. Dubai Representative office - BANK OF BEIRUT S.A.L
Cyprus Limassol International Banking Unit - BYBLOS BANK S.A.L.
France Paris Branch
United Kingdom London Branch
Belgium Brussels Sister Bank of Byblos Bank sal - BYBLOS BANK (BELGIUM) S.A.
Cyprus Limassol International Banking Unit - CREDIT LIBANAIS S.A.L.
Canada Montréal Representative office - CREDIT LIBANAIS S.A.L.
France Paris Affiliated bank with Banque Audi S.A.L. - BANQUE AUDI (France) S.A.
Switzerland Geneva Affiliated bank with Banque Audi S.A.L. - BANQUE AUDI (Switzerland) S.A.
Luxembourg Luxembourg Affiliated bank with Banque Audi S.A.L. - BANQUE AUDI (Luxembourg) S.A.
U.S.A. New York Sister Bank of Banque Audi S.A.L. - BANQUE AUDI (U.S.A.)
Brazil Sao Paolo Representative office - BANQUE AUDI (U.S.A.)
Cyprus Limassol International Banking Unit - ALLIED BANK S.A.L.
Egypt Cairo Branch (2) - JAMMAL TRUST BANK S.A.L
Egypt Alexandria Branch
Egypt Heliopolis Branch
United Kingdom London Representative office - JAMMAL TRUST BANK S.A.L.
Canada Montréal Representative office - LEBANESE CANADIAN BANK S.A.L.
Cyprus Larnaca International Banking Unit - LEBANON AND GULF BANK S.A.L.
Syria Damascus & Aleppo Representative office (2)
- SYRIAN LEBANESE COMMERCIAL
BANK S.A.L.
Cyprus Limassol International Banking Unit - BEMO-BANQUE EUROPEENNEE
POUR LE MOYEN-ORIENT S.A.L.
Syria Damascus Branch - BEMO-BANQUE EUROPEENNEE
POUR LE MOYEN-ORIENT S.A.L.
Prepared by the Association des Banques du Liban
