This in a year when the government did not function for the first five months, as rival political parties argued over the appointment of a new president – an impasse that prompted one international credit rating agency to cut the country’s sovereign rating to just a few notches above outright default.
How is it possible for such a banking sector to see such growth and maintain high liquidity in the system under such dire global and local conditions?
The answer is that Lebanon has a central bank and, in particular, a strong and respected central bank governor, Riad Salameh. Over many years and many crises, he has provided the structure and stability to provide confidence in the banking system for four million Lebanese, and millions more in the Lebanese diaspora.
Lebanon is a clear example of a country where strict regulatory controls, born out of the hard experience of countless crises, have provided long-term positive results. Mr Salameh said recently that the central bank has for years regulated structured products and derivatives, and forbidden the acquisition of subprime mortgage debt. Therefore there are no toxic assets in the Lebanese banking sector and the markets and customers are confident of this too.
The governor notes that most of the country’s banks have reported an increase in deposits and profits in the first nine months of 2008 and banks’ assets exceed $100bn, nearly four times the country’s gross domestic product.
While Lebanon’s $5.5bn in remittances may be hit by the global crunch, Mr Salameh’s tight grip on the banking sector, and his expertise at communicating his control of the situation to investors, have provided the country with the confidence, stability and resilience to weather the worst financial storms.
