Financial Regularisation and the Need for Legislative Regularity
Since its approval by the Cabinet at the end of last year, the financial regularisation bill, which is also known as the financial gap law, has sparked a wide wave of divergent positions, both opposed and supportive, with the supportive positions largely dominated by substantial reservations that bring them closer to rejection.
Although more than forty days have passed since the regularisation bill was referred to Parliament, it remains languishing in its drawers, without having been referred to the relevant committees to be studied and appropriately amended, making it highly unlikely that the current Parliament will be able to pass it if parliamentary elections are held on their constitutional schedule.
I previously addressed the perils of this delay at the end of July 2025, in an article titled "Banking Reform Awaits the Financial Gap Law", in which I argued that every delay in drafting a financial regularisation law and referring it to the Cabinet, and from there to Parliament, would inevitably derail the process of its enactment, especially with parliamentary elections approaching. This delay compounds the complexity of the crisis and obstructs the launch of banking sector reform, particularly since the implementation of the provisions of the banking reform law was tied to the enactment of the financial regularisation law.
There is no doubt that the government's approval of the financial regularisation bill constitutes, in principle, a necessary step towards putting the deposit crisis on track for a resolution, and an attempt to break the deadlock that has gripped this issue for six years. To the bill's credit, it affirms the principle of protecting small depositors and respecting the hierarchy of loss allocation, a fundamental principle that must be observed in any credible restructuring of the banking sector, in addition to referencing the concepts of answerability, accountability, and the assignment of responsibility.
According to its defenders, the bill aims to protect the overwhelming majority of depositors, as it allows around 780,000 accounts within a ceiling of $100,000 to recover their deposits in full. This approach is promoted on the grounds that protecting such a large number of depositors contributes to establishing social stability. It also contains an attempt to strike a balance between the rights of depositors on the one hand, and the state's financial capacity and public debt sustainability on the other, so as to avoid placing additional burdens on the treasury.
Yet these positive aspects do not obscure the structural flaws and fundamental gaps that mar the financial regularisation bill, particularly its failure to be accompanied by an international forensic audit that determines the size of the financial gap, its sources, and the responsibilities arising from it. Both legally and economically, it is impossible to address a financial gap whose size has not been accurately determined, or to distribute its burdens without a prior determination of responsibility for how it arose.
Perhaps the most prominent flaw in this bill is that it treats the financial gap as losses that can be distributed among economic parties, whereas deposits, from a legal standpoint, represent explicit debts owed by Banque du Liban and the state, which may not be disposed of, written off, or repaid only in part, as they constitute private property protected by the Constitution and the laws in force.
Among the defects of the bill is its unjustified conflation of the concept of losses with the concept of burdens, in a clear attempt to evade determining legal liability for the losses and holding those who caused them accountable, replacing that instead with distributing the burdens of the crisis across depositors and society as a whole, each according to their capacity to bear them.
In this context, it is not enough for this bill to guarantee depositors' rights through monthly cash payments of up to $100,000, in addition to financial certificates for large depositors, without any rigorous approach to the question of the actual value of these deposits. Experience since 2019 has proved that the real value of deposits was the first casualty of monetary policies, through the multiplicity of exchange rates, withdrawal ceilings, and deposit categories imposed under Banque du Liban circulars, acting jointly and severally with the commercial banks.
As for the long-term financial certificates for deposits exceeding $100,000, they in turn lack any real economic guarantees of their value. Although the bill considers them backed by the assets of Banque du Liban, foremost among them gold, at the same time it reaffirms adherence to the provisions of Law No. 42 issued on 24 September 1986 (the Gold Protection Law). This deprives the financial certificates designated for large depositors of any effective backing, and weakens their economic value to a great extent.
The bill assigns responsibility for repaying deposits to the state, Banque du Liban, and the commercial banks, with the banks paying 40% of their value against 60% for Banque du Liban, while Banque du Liban's share rises to 80% in the case of financial certificates, against 20% for the banks. In both cases, Banque du Liban pays the aforementioned shares on its own behalf and on behalf of the state, without the bill specifying the source of the funds on which Banque du Liban will rely to meet these obligations, a fundamental deficiency that cannot be regarded as a technical detail that can be overlooked.
As for the banks, their ability to contribute remains conditional on completing a comprehensive audit of Banque du Liban's accounts, and an accurate valuation and classification of bank assets. While the bill is expected to place on the banks the responsibility of securing around $8 billion for depositors up to the $100,000 threshold, realistic estimates indicate that available liquidity does not exceed $3 billion to $5 billion, in addition to the fact that selling most banking assets, even if it occurs, would not be sufficient to cover these obligations, raising serious questions about feasibility.
Furthermore, the financial regularisation bill lacks any integrated, forward-looking economic vision, preventing it from serving as a catalyst for attracting foreign investment or restoring confidence in the financial sector. Investors and international institutions are not looking merely for accounting settlements for past crises, but for integrated economic and fiscal policies that secure sustainable sources of financial returns on their investments, as well as an independent and effective judiciary that guarantees rights and protects investments. Meanwhile, stalling on the passage of laws in Parliament and chronic delays in issuing judicial rulings constitute negative indicators that compound the difficulties of reviving the Lebanese economy.
The multiple gaps and structural defects contained in the financial regularisation bill require serious and diligent legislative work to close them, and the amendment of its provisions to ensure fairness for depositors of all categories, along with necessary amendments that restore confidence in the state first and in the banking sector second, for when a depositor is assured that his funds are safeguarded by law, his confidence in both the state and the banks returns.
The fundamental question remains: will Parliament, and in particular the Finance and Budget Committee, manage to elevate this bill to the level of the national challenge it represents, or will those who lost the ability to protect rights prove unable to restore them?
Translated from Arabic with AI. Read it in Arabic