What options do depositors still have to recover their dollars?

While more than four years have passed since the crisis broke out, Lebanon has yet to implement the necessary reforms, starting with legal capital controls. Depositors remain at the mercy of the banking sector and nearly $97 billion in deposits — more than 90 percent of which are “lollars” present in the system before October 2019 — remain locked.

As a result of the arbitrary restrictions imposed by the banks, many exasperated depositors are trying to get their money back by a variety of sometimes illegal means — this includes the use of force, to“rob” their own bank to get their money back, and wasta that allows them to discreetly “free” all or a part of their assets.

“According to whistleblowers, until last February or March, some customers were still transferring lollars abroad or paying online with their cards as if they were not subject to the same restrictions as the rest of the people affected,” said Fouad Debs, co-founder of the Depositors Union. Yet, Debs could not confirm if this is still happening today.

If you are a depositor and feel you are too honest, or depending on your point of view, not bold or connected enough, to resort to such radical options, there are other ways for you to withdraw some of your money from Lebanon’s banks.

Option 1: Withdraw part of your money through Circular No. 158

Published in June 2021 and recently amended by interim Circular No. 674, Circular No. 158 introduces a mechanism allowing withdrawals of $400 or $300 per month, for a period of 12 months, i.e. $4,800 or $3,600 per year.

The withdrawal amount varies depending on if you signed up before July 1, 2023, and the ceiling has been “lowered under pressure from the Association of Banks in Lebanon (ABL), which did not want to meet this obligation,” said Debs.

In addition to the introduction of a $300 ceiling for new subscribers, Circular No 674, abolished another option stated in the main circular: the withdrawal of the equivalent of $400 in Lebanese lira, at a rate of LL15,000 to the dollar (the parallel market rate is around LL89,000), which meant depositors were subjected to a haircut of more than 83 percent on their withdrawal.

“In the absence of a short-term solution, this option may remain attractive for small depositors who have even less than $10,000 or $15,000 in the bank, but overall we advise against this mechanism, which has not been validated by law, particularly since in order to benefit from it, depositors are obliged to sign clauses that could later be used against them,” said Debs.

Additionally, this mechanism does not provide for the repayment of interest since the crisis started and does not take into account the lira’s depreciation.

Option 2: Withdraw all or part of the amount through bank checks in dollars

If you still have a checkbook (banks are refusing to issue new ones) or the bank gives you a bank check, it can be resold — generally in “fresh” dollars (as opposed to dollars frozen in banks) — to another person or company that needs it to repay a foreign currency loan taken out before the crisis.

Checks can only be used for this purpose, and depositors and borrowers employ this method less and less. The first reason behind this decline is that the total amount of loans being repaid through these checks has shrunk steadily since the start of the crisis. They fell from $38.6 billion to $8.6 billion (-77.6 percent) between October 2019 and May 2023, thereby reducing demand for checks.

Additionally, the process imposes a very large haircut on depositors: for example, a check-in “lollars” is now worth only 12 to 14 percent of its previous value — compared with 30 to 35 percent in mid-2020.

“We absolutely do not recommend using this method, but unfortunately some people find themselves obliged to sell checks because they absolutely need the money,” said Debs.

“Some of those who used this method two or three years ago have been able to recover more than 100 percent of the amount they paid out, particularly by investing in property. Others paid 70 or 80 percent, depending on the property purchased and its location,” said Jean Riachi, CEO of I&C Bank.

However, Riachi pointed out that it is “too late for this method to be adopted now, as developers are no longer accepting this method of payment.”

He added that “the only real estate company that still accepts payments in lollar in the purchase of its shares, is Solidere.”

If Solidere shares increase in value in the future ( their current price fluctuates at around 80 lollars, or just under $10 dollars) the cut depositors are currently suffering will be reduced.

“In the best-case scenario, depositors can expect to recover around 50 percent of the nominal value of the amount they paid,” said Riachi.

Option 3: Go to court (if possible, abroad)

To do this, you have two choices. Either take legal action in Lebanon, where no legal decision has yet resulted in deposits being returned, or lodge a complaint with a foreign court, where this type of action seems to be much more promising, but also more expensive.

There is no clear list of criteria that must be met to file a lawsuit abroad. However, previous cases that led to the repayment of deposits indicate that clients residing abroad, particularly in the UK and France, who do business in these countries and who opened their accounts while residing there, are most likely to receive a ruling in their favor.

“While we are waiting for a common solution to be found for all depositors, we believe that this method is currently the best option for those who do not need immediate access to their deposits,” said Debs.

Besides the fact that the process is slow, Riachi added that this solution is not equitable for all depositors and that in the end, it “will allow the most fortunate to withdraw their money at the expense of other depositors who do not have the means or the time to file these lawsuits.”

Option 4: Wait in the hope that you will get your money back one day

If you decide not to opt for any of these options, you can of course choose to wait and see what happens to the dispute between (among others) the banks, the government and depositors over the distribution of losses and its terms and conditions. In this case, two things are important to consider: the repayment schedule and the discount that may be applied to your deposit.

Although no bank restructuring plan has yet been adopted, the value of deposits to be protected from haircuts at the time of their repayment might range between $50,000 and $100,000, according to the latest discussions on the subject.

However, this amount could be revised downwards depending on the progress of the stand-off between the various parties involved. It remains dependent on other measures, including capital controls, tax and banking reforms, which must be part of an overall plan to end the crisis.

This article was originally published in French in L'Orient-Le Jour. Translation by Joelle El Khoury.