Banque du Liban (BDL) is Lebanon's Central Bank. BDL was established by the Code of Money and Credit in 1963 and started to effectively operate on the 1st of April 1964. BDL has special functions including notably issuing the national currency, regulating money supply, controlling interest rates, setting the monetary policy, and overseeing and developing the banking and financial sector. The monetary policies implemented by BDL are the foundation for sustained social and economic growth in Lebanon. BDL’s role has been the main factor in the banking sector’s development which has made it one of the strongest sectors in the Lebanese economy.
The Central Bank is a legal public entity enjoying financial and administrative autonomy. It is not subject to the administrative and management rules and controls applicable to the public sector. Its capital is totally appropriated by the State.
The BDL's general mission is to “safeguard the national currency in order to ensure the basis for sustained social and economic growth.”
This mission specifically consists of:
For the past two decades, BDL has successfully implemented a conservative banking model, which promotes confidence in the banking sector and attracts bank deposits and consequently, encourages investment and job creation. This model, based on a tradition of prudent regulation and supervision, has proven its resilience against the numerous challenges faced by the Lebanese economy in recent years due to political turmoil. Further, Lebanon was also immune to the global financial crisis since BDL’s regulations prohibited banks from speculating in risky products.
The BDL can use all measures it deems appropriate to fulfill its mission. It has resorted to conventional tools over the past two decades to ensure the soundness of the banking and financial sectors.
To ensure exchange rate stability, the Central Bank intervenes in the foreign exchange market by buying and selling foreign currencies.
To manage liquidity, it adjusts discount rates, intervenes in open market operations, and determines credit facilities to banks and financial institutions. It regulates banks' credit in terms of volume and types of credit, by imposing credit ceiling, by directing credits towards specific purposes or sectors and setting the terms and regulations governing credits in general.
The BDL also imposes on banks reserve requirements on assets and/or loans as determined by BDL, as well as penalties should shortfalls occur. Investment in TBs may be considered by the BDL as part of the reserve requirements.
More recently, the Central Bank of Lebanon resorted to unconventional monetary policy tools to stimulate private sector investment and boost economic growth. It has launched since 2013 yearly stimulus packages, with an average of more than USD 1 billion per year. These credit incentives, provided through the banking sector, have played a key role in boosting and supporting the numerous segments of the Lebanese economy.
The BDL has also launched efforts to support the development of the Lebanese Knowledge Economy through equity financing schemes; developed under Circular 331 in 2013.
The Central Bank also manages the various players in the financial and banking sector: it grants licenses for the establishment of banks, financial institutions, brokerage firms, money dealers, foreign banks, leasing companies and mutual funds in Lebanon. The Banking Control Commission controls and supervises these institutions. Conferring with the Association of Banks, the BDL issues circulars and resolutions governing the relations of banks with their customers.
Through its independent committees, the BDL fosters the soundness of the financial sector. The Special Investigation Committee, Lebanon's Financial Intelligence Unit, receives, analyzes, investigates suspicious transaction reports and ensures compliance of banks, financial institutions and other reporting entities with the Anti-Money Laundering / Counter Financing of Terrorism regulations. The Capital Markets Authority promotes and develops the Lebanese Capital Markets and protects investors from fraudulent activities.
There is a regular coordination between the BDL and the Government in order to ensure consistency between BDL's objectives and those of the Government. Cooperation with the Government implies coordinating fiscal and monetary policy measures. It informs the Government on economic matters that might negatively affect the national economy and currency and suggests measures that might benefit the balance of payments, the price level, public finance and offers advice on how to promote economic growth. It also ensures the relations between the Government and international financial institutions.