|Local banks won't buy new T-bills - but they will help sell them
|Lebanese banks are not in favor of subscribing to long-term Treasury bills because they will increase the mismatch between assets and liabilities, the vice chairman of BLOM bank said on Thursday.
Speaking at a luncheon at Le Bristol Hotel in honor of the media, Saad Azhari nonetheless assured his audience that the banks are willing to market these sovereign issues on behalf of the government.
"International rating agencies do not favor long-term subscription by the local bans," Azhari said.
Finance Minister Jihad Azour has asked Lebanese banks to buy LL600 billion in seven-year T-bills to finance the government's needs.
Bur most Lebanese banks, which are already holding a big chunk of the government's T-bills and Eurobonds, were not too keen to subscribe to the new issue.
Azour "was very understanding on this subject and wants the banks to market the new issue both in Lebanon and abroad," Azhari said.
Association of Banks in Lebanon president Francois Bassil repeatedly said that banks will no longer finance the government's debt, now estimated at more than $36 billion, if it does not come out with a viable and comprehensive reform paper.
The government has been tapping the local and international markets since 1992 to finance the reconstruction drive which was started by former Prime Minister Rafik Hariri, who was assassinated in February 2005. International rating agencies expressed alarm over the growing public debt, which eventually increased the risk exposure of the local banks.
Azhari also welcomed the Cabinet's draft economic plan, "which requires sacrifices from all parties to ensure success."
"Lebanon must make use of this unique - and maybe last - opportunity," he said, underlying the importance of obtaining international support.
Azhari said that neither the opposition nor the loyalists are against economic reforms but noted that most of the objections are centered on taxes.
Reflecting the views of other bankers, Azhari warned that the proposed tax increase on interest on bank deposits will harm the depositors and the banking sector. The government is proposing to increase this tax from 5 percent to 7 percent. Bankers fear that this step would prompt some depositors to move their money out of Lebanon.
"But despite this reservation, we fully back the ... reform plan," Azhari said.
He added that BLOM plans to increase the number of branches in Lebanon, Syria, Jordan and Egypt. BLOM, Lebanon's largest bank by assets and profits, acquired Misr Romanian Bank last year for almost $100 million.
Several leading Lebanese banks are also expanding outside the country in an attempt to diversify their sources of income.
The Daily Star