By Dina Al-Amood | Staff Writer 

February 3rd-  The controversial Circular 151 launched by Banque du Liban (BDL) in 2020 is being replaced by Circular 166 to lessen losses brought on since the beginning of the financial crisis. The new directive will allow all depositors to withdraw $150 monthly in cash, shifting considerably from Circular 151, which only authorized withdrawals in Lebanese pounds.  

The old directive exchanged the dollar for Lebanese pounds at increasing rates to account for the progressive devaluation of the national currency against the dollar. Since Circular 151’s launch in 2020, the rate increased from LL3,000 to LL3,900 and finally to LL8,000. This allowed banks to convert dollar deposits into Lebanese pounds at a lower cost. The desired effect left was temporary relief for the crippling finances of BDL and commercial banks. Of course, this only hurts depositors. The exchange rates were well below the unofficial market rates. As a result, depositors received less for their dollar deposits than they would have if they had exchanged them at the black market rate. This is how Circular 151 first distinguished between bank and fresh dollars. 

Now that the replacement Circular 166 allows limited withdrawals in dollars, depositors are better off. For the first time, the Circular also does not discriminate on the fund size in an account or whether it was opened before or after October 17, 2019. However, in a new condition, beneficiary depositors must forgo bank secrecy on all their Lebanese bank accounts to ensure withdrawals are made from a single account. 

Also, Circular 158 beneficiaries are naturally excluded from the new circular since they already receive between $300 and $400 monthly in fresh dollars. The 158 Circular applies to active Foreign Currency Yield (FCY) accounts as of 31 October 2019, minors, and co-holders of Joint and Co-Joint accounts. 

While Circular 158 cost BDL and banks $1.78 billion in two years, the new regulation will cost anywhere between $360 million and $450 million annually. While prominent commercial banks can afford to implement this directive, many smaller banks are significantly set back due to liquidity issues. These banks have submitted their concerns and await updates from the central bank on the circular addressing their unique circumstance. 

Sources:

https://today.lorientlejour.com/article/1366865/banque-du-liban-replaces-circular-no-151.html#:~:text=Banque%20du%20Liban%20on%20Saturday,from%20dollar%2Ddenominated%20bank%20accounts.

https://www.byblosbank.com/about/faqs/158-banque-du-liban-basic-circular

https://www.lbcgroup.tv/news/news-bulletin-reports/751764/circular-166-bdl-introduces-new-circular-instead-of-circular-151-to-al/en

https://english.alarabiya.net/business/economy/2024/02/04/Lebanon-allows-bank-depositors-to-withdraw-150-a-month-from-some-old-accounts