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French Version


Salameh : Lebanon 'committed' to implementing Basel II

Analysts warn not all banks can meet tough conditions

Central Bank Governor Riad Salameh said Lebanon is committed to implementing Basel II to ensure better transparency in the banking sector.

"From now on its no longer acceptable for the stakeholders (i.e: shareholders, clients and staff) to be taken by surprise due to the withholding of information and lack of transparency by banks," Salameh told a conference on Bank Risk Management that took place in Beirut.

Basel II, which will be implemented in 2006 and 2007, aims at reducing all risks by commercial banks through a series of measures such as increasing the paid-up capital and investing more money in training of staff to handle all operational risks.

"Basel II has assured that banks are subject to numerous risks such as loan and credit risks as well as market risks. Other risks involve operational and bad reputation."

Lebanese banks, with assets of more than $67 billion, have successfully complied with the capital adequacy ratios.

But some analysts believe that not all Lebanese banks may be able to meet the tough conditions of Basel II because this requires additional investments and higher capitals.

Salameh said that Basel II also require that banks increase capitals and to develop the internal banking supervision.

He added that Basel II measures will allow banks to improve the return on equity.

Salameh stressed that banks should also abide by the corporate governance principles.

The governor said the Central Bank succeeded in its mission despite the fact that Lebanon's credit ratings are relatively low due to the risks posed by the high public debt.

Moody's and other international credit agencies are urging Lebanese banks to reduce the $36.8 billion public debt in order to reduce foreign currency credit risks.

Lebanese banks are the biggest lenders to the government, which resorts to the issuance of treasury bills and Eurobonds to finance the public debt.

Walid Alameddine, the chairman of the Banking Control Commission, also underlined the importance of Basel II.

"Lebanese banks have continued to develop themselves and I expect that total capitals of more than $500 million in 2005," Alameddine said.

But Alameddine said that there is one criterion out of 30 which Lebanese banks are not implementing.

This criterion calls for granting immunity powers to all members of the Banking Control Commission.

He added that the International Monetary Fund mentioned in its report in 2001 that this time it is the only weak point in the banking supervision system in Lebanon.

Alameddine said he will propose to the finance minister to give legal immunity to the Banking Control Commission.

Beirut 21-11-2005
Osama Habib
The Daily Star



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