A large crowd was outside an AM Bank branch in Adlieh, Beirut. (Credit: Philippe Hange Boutros/L'Orient-Le Jour)
More and more banks have begun implementing the new terms for converting Lebanese lira into dollars according to the exchange rate set by Banque du Liban’s (BDL) Sayrafa platform, two days after the central bank decree.
The Sayrafa rate — currently LL38,000 to the dollar — is generally lower than the market rate (about LL43,000, as of Thursday), thus allowing Lebanese who are subject to bank restrictions due obtaining dollars in exchange for lira. It is a relatively lower haircut compared to previous months, when the withdrawal of dollars at the former official pegged rate of LL1,507.5 was the norm.
Al-Mawarid Bank (AM Bank) was the first to implement the new measure. As a result, AM Bank branches filled with customers, as well as customers with accounts at other banks. AM Bank management indicated Wednesday that it was ready to welcome people who were unable to convert at the Sayrafa rate at their own banks.
“There were a lot of people and in a good atmosphere, which contrasts with the poisonous climate of recent months,” AM Bank CEO Marwan Kheireddine told L’Orient-Le Jour, referring to the wave of holdups organized by depositors challenging the illegal banking restrictions limiting access to their foreign currency accounts.
“We welcomed our own customers until 1 p.m., then the others had their turn,” he said, adding that the bank’s branches will remain open until 5 p.m. on Friday, and would open until 1 p.m. on Dec. 31, Jan. 1 and Jan. 2.
MEAB, BBAC, FNB and others
MEAB (Middle East & Africa Bank) also announced in a statement Wednesday evening it would begin welcoming its own customers and those of other banks.
Those hoping to make a dollar withdrawal must bring a copy of their bank statement and their identity card, a MEAB customer service representative told L’Orient-Le Jour.
The other banks that have begun honoring these transactions include the BBAC, the Lebanese Swiss Bank, the First National Bank and BLOM Bank, according to a source at BDL.
Other banks will apply the new terms and conditions to individuals and businesses starting next Tuesday.
On Tuesday, BDL adopted new measures for transactions related to Circular No. 161, which for the past year has allowed holders of lira accounts to convert and withdraw small amounts in “fresh dollars” (dollars not subject to banking restrictions) each month at the Sayrafa rate.
BDL then raised the Sayrafa rate by LL6,800 to LL38,000 and lifted all limits on buying and selling for individuals and companies in the banks, to which it has given some freedom of adjustment. The institution finally asked banks to keep their branches open until 5 p.m. Friday.
The limits vary from one bank to another, though appear to average roughly LL100 million - LL200 million per month (the old limits were up to $400). There are also limits related to the conversion of “bank dollars” or “lollars” (dollars locked in the bank since the beginning of the crisis) and which vary according to the bank and the client’s account.
Some banks, including AM Bank, claim they do not impose any limits.
“We validate requests of up to LL1 billion per customer by imposing a KYC procedure,” said Kheireddine, referring to “know your customer,” a verification procedure imposed by international banking regulations. “For a sum above LL1 billion, we have to organize the logistics of the operation and there is a specific procedure.”
On Thursday, banks that started registering the conversion requests at the Sayrafa rate collected funds in Lebanese lira and will give the requested dollars next week Tuesday or Wednesday, according to the banks.
Each customer can only perform the transaction once per month and therefore must come with all the Lebanese lira they want to exchange. The rate applied will be that of the day of the deposit.
Finally, the banks charge a commission on each transaction, ranging from two to four percent, according to the banks contacted by L’Orient-Le Jour. This modifies the effective rate to LL38,760 (with a two percent commission) and LL39,520 (with a four percent commission).
Despite this, the margin remains substantial. Take the example of a bank that imposes a limit of LL200 million and takes a four percent commission:
· The person could go to an exchange shop with $4,650 to get LL200 million at Thursday’s exchange rate of LL43,000.
· Then this person goes to their bank to exchange the LL200 million at the effective rate of LL39,520 to the dollar (including the commission), which would allow them to collect $5,060, cashable next week.
· The profit will be almost $400 in a single transaction, or nearly nine percent.
· The bank earns just over $200 with its four percent commission.
This article was originally published in French in L'Orient-Le Jour. Translation by Joelle El Khoury.