The International Monetary Fund (IMF) is ramping up pressure on Lebanon to implement key financial reforms, particularly in overhauling banking secrecy laws and establishing a dedicated authority for bank restructuring. In response, the Ministry of Finance has drafted amendments to existing laws and submitted them to the government for review.

Lebanese authorities are working to fulfill the IMF’s requirements, which are considered essential to securing a long-awaited bailout. The Finance Minister’s team, in collaboration with Lebanon’s IMF negotiation committee, has prepared a package of amendments to financial and monetary regulations. These legislative changes are expected to be presented to the Council of Ministers for approval in alignment with IMF recommendations.

Sources within the Ministry of Finance told Nidaa Al Watan that two legislative issues have been prioritized: revising Lebanon’s decades-old banking secrecy law and creating a framework for resolving failing banks. The IMF has insisted on the term “resolution” rather than “recovery,” arguing that Lebanon lacks the necessary legal structures for banking sector reform.

According to the sources, Law 110/91—previously considered a banking sector reform law—is deemed insufficient by the IMF. The Fund believes a dedicated resolution authority is needed, as the current Banking Control Commission’s role is limited to oversight and reporting rather than enforcing corrective measures on non-compliant banks.

The IMF has also stressed that Lebanon’s existing regulatory framework is inadequate for restructuring troubled financial institutions. To address this, the Ministry of Finance has submitted a proposal to amend the banking secrecy law, focusing on two key principles:

1. The 1956 banking secrecy law no longer serves as a major draw for deposits as it once did.

2. Legal stability must be ensured for long-standing depositors who conducted financial transactions under the protections of the original law.

The proposed amendment allows the Banking Control Commission and the Central Bank to access any new bank accounts opened after the new law takes effect. Additionally, during the restructuring process, authorities would have the right to lift banking secrecy on old accounts retroactively—but only for the purpose of implementing restructuring measures, not for broader financial investigations.

Alongside the banking secrecy law, the Ministry of Finance has submitted a separate proposal to amend Lebanon’s Code of Money and Credit. Officials are also working on revisions to the bank resolution law, which has already been reviewed by both the IMF and the Central Bank.

A key recommendation involves assigning bank resolution responsibilities to the Higher Banking Commission instead of creating a new entity. Under the proposal, the commission’s structure would be modified, including changes to its membership, to enhance its efficiency.

Discussions between Lebanon’s IMF negotiation team and Fund officials have also touched on a proposed law to address Lebanon’s financial gap. However, Finance Ministry sources noted that this legislation has yet to be drafted. For now, officials are prioritizing the banking secrecy, monetary, and bank resolution reforms, which they believe will satisfy the IMF delegation.

Ministry officials are also concerned that linking all legislative reforms together could delay progress, as drafting the financial gap law may take considerable time, similar to the prolonged process of previous legislative efforts.

Sources revealed that the proposed bank resolution law includes a provision allowing banks to retain their deposits at the Central Bank at book value until a financial gap law or a rebalancing mechanism is enacted. The Central Bank is expected to draft this proposal and submit it to the Ministry of Finance, avoiding the need for the ministry to intervene directly.

Officials warn that writing off banks’ deposits at the Central Bank would lead to widespread financial collapse—an outcome they say would not only bankrupt the banking sector but also wipe out depositors’ funds. Such a scenario, they stress, is not an option for any party in Lebanon as the country struggles to navigate its deep economic crisis.