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Banking chief proposes reforms - Stock market oversight and loan rescheduling needed (Daily Star)

Increased accountability for bankers and the establishment of an independent committee to oversee the stock market are important steps toward revitalizing the country’s financial sector, according to Walid Alameddine, head of the Banking Control Commission.

Speaking at the Beirut 2004 Strategic Investment Forum on Tuesday, Alameddine also said banks should address non-performing loans that were extended to the private sector despite a gap between the large banking sector and a poor financial market. “Supervision of the financial markets is currently under the finance minister. This situation does not exist anywhere else in the world and needs reform,” Alameddine told participants of the forum. “The Cabinet is currently studying means to revitalize the stock market and the possibility of appointing an independent supervisory commission which could be the Banking Control Commission,” he added.

Alameddine said the poor performance of the stock market, with a market capitalization of barely $3 billion, was inconsistent with a strong banking sector that has grown to $60 billion.

He also said that the weakness of the stock market was impeding the growth of businesses and limiting their productivity. “The stock market must be revitalized, allowing companies to issue shares and increase capital,” said Alameddine.

He also urged the government to renew a bank merger law that expired last year and was temporarily extended. However, he called for an amendment to the law that would penalize those who led banks into financial trouble, saying that the lack of penalties undermined the credibility of bank merger operations.

Renewal of the law is caught in the political spat between President Emile Lahoud, who considers the law too costly, and Prime Minister Rafik Hariri, who argues that the law has helped rescue a number of banks at minimal cost. “Until the bank merger law is renewed, the Banking Control Commission and the Central Bank will be unable to resolve many cases that arise,” said Alameddine.

Alameddine claimed local banks were also to blame for the weakness of the private sector, which is weighed down by debt owed to these banks.

He accused the banks of delaying the implementation of an agreement between the Central Bank and the Association of Banks in Lebanon that would allow for the rescheduling of non-performing loans. “Banks right now are not fulfiling their duty to quickly resolve the status of troubled creditors,” he said. “The Banking Control Commission has received fewer than 10 applications, from only two banks, to resolve non-performing loans.”

There are no statistics available for the number of non-performing loans owed to local banks, but unofficial estimates put the figure at 30 percent of the banks’ total loan portfolio to the private sector.

Alameddine also said that new laws should be passed defining the rights of both depositors and creditors.

Beirut 06-01-2004
Dania Saadi
The Daily Star

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