Lebanon Banking Reform: Legislative Battles Over Deposit Recovery and IMF Standards

Lebanese lawmakers advanced structural reforms on July 22, 2026, by adopting 11 additional articles of the banking restructuring bill during a Finance and Budget Committee session in Beirut. Led by committee chairman Ibrahim Kanaan, legislators reviewed the framework alongside Central Bank Governor Karim Said and Finance Minister Yassine Jaber. The legislative push attempts to resolve systemic financial losses following a catastrophic economic contraction, though critical disagreements persist regarding depositor restitution mechanics and adherence to international lender guidelines.

The Macroeconomic Toll and the financial gap

Lebanon’s ongoing financial crisis, which erupted in 2019, continues to depress national output and impoverish the population. According to a World Bank report published on March 15, 2025, the country’s gross domestic product has plummeted by 40 percent since 2018, shrinking from 55 billion dollars down to 32 billion dollars. Parallel market exchange rates for the Lebanese pound reached 90,000 to the dollar by April 2025, a dramatic collapse from the historic peg of 1,507. Inflation peaked at 200 percent in 2024, eviscerating average wages that once sat at 800 dollars monthly.

At the center of this collapse sits a massive financial deficit. An International Monetary Fund assessment issued on March 20, 2025, values the total losses of the Lebanese banking sector at 73 billion dollars, representing roughly 225 percent of the 2024 GDP. This staggering shortfall consists of 40 billion dollars in toxic assets tied up in insolvent state obligations, 20 billion dollars in non-performing loans owed by bankrupt commercial entities, and 13 billion dollars in capital flight executed by elite depositors between 2017 and 2019 as confirmed by a Banque du Liban audit on March 15, 2025. Approximately millions of account holders remain locked out of their savings, facing strict monthly withdrawal caps of 100 to 200 dollars.

Legislative Progress and the Looming Deposit Recovery Debate

During the July 22, 2026 session, the Finance and Budget Committee worked through remaining points of contention dividing the Banque du Liban, the government, and international bodies. Committee chairman Ibrahim Kanaan emphasized that the ultimate success of the banking reorganization hinges directly on supplementary legislation addressing the financial gap.

“We have resumed today discussions on the law for restructuring banks, after having settled during the previous session points of disagreement between the Banque du Liban, the International Monetary Fund, and the government,” Kanaan stated following the meeting, according to coverage published by Daily Beirut. Kanaan issued a direct caution to executive authorities regarding the missing enforcement mechanisms for depositor reimbursements.

“The central point and fundamental of any financial and monetary reform is the recovery of deposits, which includes the rights of depositors and the mechanism of recovery of these rights, which must be clear,” Kanaan noted. He warned against enacting a legal framework devoid of secured financing, urging the administration to prevent recycled debates and stalled responsibilities.

Corporate restructuring on this scale requires meticulous alignment with regulatory mandates.

Diverging Frameworks Between the IMF and National Authorities

The legislative battle underscores a fundamental tension between international financial expectations and domestic institutional interests. The Council of Ministers initially approved an overarching reform package on April 11, 2025, under Prime Minister Nawaf Salam, marking the first time the executive branch formally tackled a legal vacuum dating back to 1967.

Despite these preliminary approvals, disagreements over loss allocation continue to stall final adoption. While the government aims to satisfy IMF conditions to unlock foreign assistance, domestic policymakers face immense political resistance from entities representing large depositors and banking stakeholders.