|Central Bank urges tougher measures for region (Daily Star)
|Arab banks to review their overall policies in terms of supervision, transparency
Lebanon's Central Bank governor, Riad Salameh, urged Arab banks Thursday to adopt tough measures to prevent money laundering and terrorist funding operations.
Speaking at the opening of a conference on Arab banking supervision in Beirut, Salameh said banking authorities must be firm in implementing international criteria on risk management as clearly stipulated by the Basel II committee, the international body that regulates minimal capital requirements for banks and which was established at the 1999 "Basel II" conference in Switzerland.
"We must make sure banks apply measures that prevent ... money laundering and the funding of terrorist operations," Salameh said.
Lebanon and several other Arab states have applied tough laws in the past few years to target money laundering.
Lebanon, one of the few countries in the world with a banking secrecy law, came under pressure from the Financial Action Task Force (FATF), part of the G-7 group, to upgrade its banking supervision to ensure organized crime and drug cartels do not channel funds through Lebanese banks.
In 2001, the FATF removed Lebanon's name from a list of countries thought to be failing to cooperate in the fight against money laundering.
Salameh also called on Arab countries to update their banking laws "if they wanted to contain the effects of globalization in the future."
Salameh said that capital inflows into the Arab world represent only 2 percent of all global inflows.
"If the argument is right about the risks of globalization then it also right to say that any laxity in carrying out banking reforms will be equal to economic recession."
Salameh added that Lebanese banks had applied capital adequacy ratios of 12 percent in 2002 and are expected to meet the requirements of Basel II in the future.
But some financial analysts say that not all Lebanese banks will be able to meet the body's strict conditions, which require banks to raise capital and improve risk management.
Walid Alamuddin, the head of the Banking Control Commission, said that the successful implementation of banking supervision guidelines has helped improve the size of assets and deposits in Lebanon.
"Total assets of commercial banks in Lebanon now exceed $70 billion, if the assets of branches abroad are included," Alamuddin said.
He added that the size of Lebanese banks' assets are three times more than the country's gross domestic product - one of the highest ratios in the world.
Alamuddin said Lebanon is expected to begin implementation of Basel II's requirements at the beginning of 2007.
The Daily Star