IMF welcomes Lebanon bank law changes as 'major step'

The International Monetary Fund has welcomed amendments passed by Lebanon’s parliament to a bank resolution law as a “major step” toward addressing the chronic funding shortfalls that have left the country’s financial system in collapse. The changes, which alter governance at the Central Bank and create a strengthened Higher Banking Commission, form part of a package of measures aimed at fixing the banking sector and unlocking IMF support that could help bring government debt out of default.

"We met 99% of what they wanted," legislator Alain Aoun, a member of Parliament’s Finance and Budget Committee, told Reuters about the revisions to the draft law, highlighting the parliament’s efforts to accommodate international concerns.

Key changes and immediate responses

The most notable amendments adjust the Central Bank’s governance procedures and reshape the composition and powers of the Higher Banking Commission, a body within the Central Bank empowered by the revisions to "decide the fate of Lebanon’s banks." That body will determine whether individual banks require restructuring, liquidation, or other rehabilitation steps.

Federico Lima, the IMF representative in Lebanon, stressed the importance of follow-through, saying the "effective implementation of this new bank resolution framework is critical." He added that IMF staff continue talks with Lebanese authorities on aligning the draft Financial Stabilization and Depositor Recovery (FSDR) law with international principles.

Context and scale of the crisis

Lebanon has been in financial freefall since late 2019, after decades of unsustainable public spending. Banks imposed sweeping capital controls, depositors were frozen out of dollar accounts, and the Lebanese pound plummeted by more than 90%. In 2022 the government estimated losses from the financial crisis at about $70 billion — a figure analysts say is likely now higher. Separate damage from the war with Israel has been estimated at around $7 billion.

Parliament approved the amendments last week, but the law remains pending presidential approval and could still face legal challenges. The Constitutional Council has precedent for annulling provisions of earlier financial legislation, and any referral could delay implementation. The draft law has already seen multiple rewrites amid competing demands from banks, depositors and international institutions.

• Changes to Central Bank governance and the Higher Banking Commission’s makeup and powers
• Creation of a framework to determine bank restructuring, liquidation and rehabilitation
• Ongoing efforts to align the FSDR law with international principles and IMF expectations

Outlook

While the IMF welcomed the parliamentary vote, officials cautioned that passage alone will not restore confidence without rapid and transparent implementation. Federico Lima’s emphasis on effective implementation underscores that the law is a necessary but not sufficient step toward unlocking IMF funding and a broader economic recovery.

Lebanese officials acknowledge the stakes. "This is the only country in the world that has had a banking crisis for seven years and has not tried to find a solution," a senior Lebanese official told Reuters, warning that remaining in the current impasse "shouldn't be an option." With presidential approval still required and potential constitutional challenges looming, the timeline for depositors to see relief and for international financing to flow remains uncertain.