BEIRUT, Feb 20, 2022 (BSS/AFP) - Once the economy's crown jewel, Lebanon's
banks are shutting branches and laying off employees in droves, resizing to
the bleak reality of a crisis they are widely blamed for.

  Before the onset in 2019 of a financial collapse deemed one of the world's
worst since the 1850s by the World Bank, the small Mediterranean country had
an oversized but prosperous banking sector.

  The capital Beirut was a booming regional financial hub, attracting savers
keen to profit from high interest rates and banking secrecy laws.

  But more than two years into the crisis, the reputation of Lebanese
lenders has been shredded. A dizzying currency collapse, coupled with banks
imposing strict withdrawal limits and prohibiting transfers abroad, has left
ordinary depositors watching on helplessly as their savings evaporate.

  And yet bankers stand accused of bypassing those exact same capital
controls -- stoking the crisis by helping the political elite squirrel
billions of dollars overseas.

  Their trust destroyed, citizens now keep new income well away from the
banks, which in turn are deprived of money they could lend.

  "The whole banking system today is made up of zombie banks," said economic
analyst Patrick Mardini.

 "They don't work as banks anymore -- they don't give loans, they don't
take new deposits."

  - 'Abandoned country' -

 As a result, the industry has been forced to scale back its operations.

 In 2019, Lebanon ranked second in the region for bank branches per 100,000
people, according to the World Bank, and held a total of around $150 billion
in deposits.

  Deposits by Arab investors and Lebanese expatriates propelled the banking
sector to peak at three times the value of national economic output.

  But more than 160 branches have closed since the end of 2018, leaving a
total of 919 branches operating across the country, according to the
Association of Banks in Lebanon (ABL).

  The number of employees has dropped by around 5,900, reducing the sector's
workforce to roughly 20,000 late last year. "Lebanon is an abandoned
country," ABL chief Salim Sfeir told AFP, referring to negligence by the
nation's authorities.

  The association claims the sector has been "forced to adapt to the
contraction of the economy," even as others blame the banks for overall
economic activity plunging by more than half since 2019.

  The Lebanese pound, officially pegged at 1,507 to the greenback since
1997, has lost more than 90 percent of its value on the black market.

   The slide has prompted banks to adopt a plethora of exchange rates for
transactions even though the official rate remains unchanged.

  Those who hold dollar accounts have mostly had to withdraw cash in Lebanese
pounds and at a fraction of the black market rate. "If we apply international
accounting standards, almost all Lebanese banks are insolvent," investment
banker Jean Riachi said.

  - 'Exit the market' -

  Lebanon's government defaulted on its foreign debt in 2020, stymying the
country's hopes of quickly securing new international credit or donor money
to stem the crisis.

   The ruling elite, beset by internal rifts that have repeatedly left the
country without a government, has yet to agree on an economic recovery plan
with international creditors.

   Disagreements between the government, the central bank and commercial
banks over the scale of financial sector losses have dogged talks with the
International Monetary Fund that first started nearly two years ago.

   In December, the government of Prime Minister Najib Mikati set financial
sector losses at around $69 billion in a crucial step towards advancing IMF
talks.

   But while the global lender said early this month that efforts to agree on
a rescue package have progressed, it made clear more work was needed,
especially in terms of "restructuring of the financial sector".

   The analyst Mardini said bank restructuring proposals have been discussed
by several governments.

   Central bank chief Riad Salameh has said banks that are unable to lend
must "exit the market".

   But meaningful progress on restructuring has been impeded by a political
elite who maintain large shares in some of the main banks, according to
Mardini.

   For out-of-pocket depositors, the details of any restructuring
arrangements are a secondary concern.

   "I just want to recover my savings," said Hicham, a businessman who asked
to use his first name only over privacy concerns.

   "All the parties concerned must assume their responsibilities."