Lebanese banks implement a "soft withdrawal" from Iraq

by **claud39** Wed Jul 22, 2020 10:40 am

7/21/2020

{International: Al Furat News} The repercussions of the liquidity crisis in foreign currencies in Lebanon are spreading rapidly, to move from the original market of the Lebanese banking system to its external proliferation network, which is under increasing pressure due to the failure to automatically respond to the requirements of increasing capital {capital accumulation} imposed by central banks in Some countries of banking presence, diminishing competitiveness of subsidiary units in foreign markets, and restructuring strategic options to focus on the "most feasible" in reducing or enhancing proliferation, depending on the financial and monetary crises hitting Lebanon and private sector institutions in it.

It seems that the presence of banks owned by the majority of its shares for Lebanese banks, numbering 10 in the Iraqi market, entered a difficult labor shortly after reducing the rating of the local banking sector according to reducing the sovereign rating closest to the degree of "default", and the difficulty of responding to the new measures imposed by the Central Bank of Iraq, especially in terms of compatibility With the minimum required for the assets at the end of next year, not to allow the transfer of the profits achieved for three consecutive years, in addition to the decline in the returns achieved compared to the investment invested.

This remarkable development comes as a second qualitative and strong change received by the external spread network of Lebanese banks. It was preceded by the banks ’administrations“ forced ”to voluntarily reduce the work of the seven banks affiliated with them in the Syrian market and isolate their budgets from the data collected for completely different reasons related to the Syrian crisis and successive US sanctions, the latest of which is the start of the implementation of the“ Caesar’s Law ”that pursues individuals and companies who conduct commercial and financial transactions With "the Syrian regime."

Sources said that two Lebanese banks affiliated to the Iraqi market, at least, the "Fransabank" and "Lebanese Credit" groups, officially informed the Iraqi Central Bank of their withdrawal intention, while strictly observing the approved rules that guarantee the full protection of the rights of clients. While the departments of 5 banks continue to examine options, with similar decisions likely to be taken, especially in light of discouraging assessments of feasibility in exchange for pumping new private funds. While 3 banks will maintain their subsidiaries because they basically meet the required Iraqi conditions.

A concerned banking reference confirmed that most bank departments are restructuring their external presence, in a manner consistent with feasibility and profitability, and not because of the inability to respond to the requirements of increasing capital. In this context, the decision of the "Lebanese Credit Bank" focuses on expanding its spread in Africa through its independent "International Credit Bank" in Senegal, which has a license from the Central Bank of West African States (BCEAO), which allows establishing subsidiary banks in 8 countries that share a unified monetary authority. . In addition to the banks ’tendency to reinforce subsidiary branches in Cyprus.

And an understanding from banking sources that the withdrawal process will not mean liquidation, but rather will be through direct sale to Lebanese banks wishing to continue in the Iraqi market. Information has been confirmed on the completion of an agreement relating to one of the two banks, and the completion of the second is expected similarly. While it is likely that a later option would be joined by the banks that intend to stop their activities, according to the fact that the assets of each are around $ 100 million, and it is difficult for them to raise them to $ 210 million by the end of 2021, as required. Consequently, its portfolios can be sold to Iraqi banks or for the benefit of the three or four Lebanese banks that will decide to continue out of the 10 licensed and operating in the Iraqi market.

The Central Bank of Iraq was to impose that foreign banking units meet a set of new standards; Among them is that the size of the budget of the subsidiary branch is parallel to the value of the Iraqi bank’s capital of 250 billion Iraqi dinars; The equivalent of $ 210 million, not later than the end of next year. And it was allowed to be 20 per cent of the capital of the banking unit outside Iraq. However, the bank stipulated that it be deposited with banks with a credit rating of "B" and above, in addition to preventing the transfer of profits achieved for the years 2019, 2020 and 2021.

The list of Lebanese banks in Iraq, in order of total updated assets, includes banks: “Beirut and Arab countries”, “Byblos”, “Odeh”, “Meed (the Mediterranean)”, and “Bloom (Lebanon and Overseas)”, and MIAB (Middle East and Africa), IBL (Intercontinental Bank), Fransabank,
The total assets of these banks are about $ 1.9 billion, as they are at the end of the first quarter of this year; This is about 0.9 of the total budget for the Lebanese banks.

Ammar Al-Masoudi

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