The headquarters of the Syrian Central Bank in 2024. (Credit: AFP)
The Syrian central bank on Tuesday ordered commercial credit institutions to set aside full provisions to cover losses related to Lebanon's financial collapse and to submit credible restructuring plans within six months — a measure likely to reshape an already weakened Syrian banking sector.
The directive, issued Sept. 22, requires banks to acknowledge 100 percent of their exposure to the Lebanese financial system, where Syrian institutions had placed funds during the country’s civil war.
According to Syrian authorities, this decision is part of a broader effort to clean up a banking sector weakened by 14 years of war and Western sanctions, and to address a liquidity crisis that has paralyzed economic activity.
The move has led some banks to seek new investors or consider foreign acquisitions, three Syrian bankers told Reuters.
Commercial banks "will have to present us with a credible restructuring plan, and the countdown has begun," Syrian Central Bank Governor Abdul Qadir al-Hasriya told Reuters.
"They can find various ways to do this, including through their sister banks in Lebanon or by partnering with other international institutions," he added.
Syrian commercial banks have an exposure of more than $1.6 billion in Lebanon, al-Hasriya said.
This represents a significant share of the $4.9 billion in total deposits for the Syrian commercial banking sector, according to a Reuters calculation based on 2024 financial reports from the 14 Syrian commercial banks published by the Damascus Stock Exchange.
The most affected institutions include Bank al-Sharq, Fransabank, Bank of Syria and Overseas, Banque Bemo Saudi Fransi, Shahba Bank and Ahli Trust Bank — all originally Lebanese banks that opened branches in Syria in the 2000s.
None of these banks has yet responded to requests for comment.
According to bankers, these institutions turned to Lebanon during the Syrian Civil War, lacking other options due to Western sanctions, which have been gradually eased since the fall of former Syrian President Bashar al-Assad last year.
However, these deposits were frozen when the Lebanese banking system collapsed in 2019, after years of poor fiscal management and political gridlock.
Lebanon has yet to adopt an exit plan, despite the Lebanese government's intention to pass a law organizing the allocation of tens of billions of dollars in losses from the banking sector's collapse and deposit restitution.
Banks criticize short timeline
Some Syrian bankers have criticized the deadline as too tight to comply with the directive requiring complete provisioning related to Lebanon.
"The decision itself is justified, but the time allowed is not," said one banker. "It’s premature, even political,” he added, as Syrian officials reject "any political motivation."
The Syrian central bank governor said the measure was part of a broader effort to comply with regulations neglected by the previous government. "We don’t want banks to face difficulties, but denial is not a solution either," he said, adding, "We are moving from the previous regime’s denial to recognizing and dealing with the crisis."
According to three Syrian bankers, some banks involved have already begun initial discussions with Arab financial institutions, including banks based in Jordan, Saudi Arabia and Qatar, regarding possible acquisitions.
Hasriya also said the government aims to "double by 2030 the number of commercial banks operating in Syrian territory" and that several foreign institutions "are already in the process of being licensed."
He declined to give further details, citing the "confidential" nature of the process.
This article was translated from L'Orient-Le Jour.
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