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Central Bank steps into Al-Madina crisis - Provisional manager appointed to contain damage (Daily Star)

The Central Bank has appointed a provisional manager for the troubled Al-Madina Bank in an attempt to protect its depositors and contain a looming crisis.

The Central Bank has not yet decided to freeze the accounts of a number of shareholders who are suspected of money laundering.

The move came after news that the bank’s chairman, Adnan Abu Ayyash, failed to pay $250 million to the Central Bank to settle a number of bounced checks.

Abu Ayyash, a renowned banker and businessman, managed to raise more than $500 million a few months ago to cover part of the losses which the bank had incurred.

Sources claim the bank’s total debt is about $1.2 billion, with only $500 million having been paid out to depositors.“We have appointed Andre Bandaly to run Al-Madina Bank to control all the activity in the bank,” an official at the Central Bank told The Daily Star.

The new manager is expected to file a report to the Central Bank on his findings. The bank is accused of misappropriation of funds, fraudulent practices, and failing to apply proper accounting procedures.“Our main concern is to ensure the money of depositors at Al-Madina Bank,” the official said, adding that the Central Bank wants to control the crisis so it will not have any impact on the banking sector.

With some of the bank’s shareholders owning hotels and shopping centers in Beirut, the crisis also has potential to spread beyond the banking sector.

The Central Bank said it has no intention to liquidate Al-Madina and its subsidiary, United Credit Bank, until the new manager is given more time.

It added that depositors at Al-Madina Bank had neither panicked nor withdrawn their money. But a leading banker said Al-Madina should be self-liquidated because the Central Bank cannot be expected to continuously redress the bank’s failings.“If the bank is liquidated, the deposits will be transferred to other banks. This way no one will lose a penny,” the banker said.

Lebanon’s name was removed last year by the Financial Action Task Force, part of the G7, from a list of countries accused of not cooperating in the fight on money laundering.

The government and the Central Bank passed a money laundering law in 2001 to ease the campaign against Lebanon from Western countries still concerned by the banking secrecy law. Lebanon is one of the few countries in the world to offer banking secrecy, but under the new law, any person depositing more than $10,000 in a bank must now provide personal and business information.

Sources said some Western countries want the government to prosecute any suspect who is involved in money laundering.“The judiciary should show more resolve in prosecuting suspected money launderers. It’s not enough to freeze accounts while suspects are still at large,” a source said.

But some bankers doubt whether the state prosecutor would arrest, or even incarcerate, any suspect at present, adding that some of these suspects have strong political connections.

Beirut 15-07-2003
Osama Habib
The Daily Star



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