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Lebanon's banking association seeks more detail on central bank demands

BEIRUT, Sept 9 (Reuters) - Lebanon’s banking association has sought clarifications from the central bank about calls for the repatriation of deposits and other demands aimed at addressing a banking crisis caused by the nation’s deep economic problems.

The Association of Banks in Lebanon (ABL) sent a letter to Banque du Liban last week seeking further detail, ABL’s lawyer told Reuters, adding that in principle the association supported the central bank’s efforts to address the crisis.

Political unrest, slowing remittances and a foreign exchange liquidity crunch left the state struggling to finance a mountain of debt, plunging the banks into crisis and prompting them to shut their doors to depositors last year.

The central bank has issued circulars that have included telling banks to raise capital by 20% by the end of February, to provision for losses on Lebanese Eurobond holdings and urging the repatriation of funds sent abroad by big depositors.

ABL’s lawyer Akram Azoury said the central bank’s approach was “constructive and positive” but elements needed to be clarified before the association in a country of about 50 or so Lebanese banks gave its final position on the plan.

He said one issue, which was included in circular 154, that needed more clarity was whether the demand to repatriate deposits meant deposits had to be held in accounts inside Lebanon or whether they could be held in an account abroad in the name of a Lebanese bank.

“This is one of the major questions addressed to the central bank, if you read carefully this circular, the circular does not specifically address the repatriation of the foreign currency transfers,” he said.

Some analysts have said fixing the banking sector will depend on having a much wider economic rescue plan in place.

A new government to address the economic crisis is being formed under pressure from France, which is leading international efforts to push for sweeping economic reforms that Beirut has promised in the past but failed to deliver.

“It is very important to emphasise that the deep reason for this crisis is political rather than monetary,” said Azoury. “Without a comprehensive political rescue plan, the monetary plan in itself can never follow.” (Reporting by Edmund Blair; Editing by Hugh Lawson)