Amendments to Lebanon’s banking reform law spark debate over IMF demands, governance independence, accountability, and systemic financial crisis implications ongoing.
Amendments to the banking sector reform law
The Parliamentary Finance and Budget Committee has set next Thursday as the deadline for receiving the observations of the International Monetary Fund (IMF) and the government on the new draft law amending the Law on the Reform and Reorganization of Banks. The Minister of Finance and Banque du Liban are also required to submit the version they agreed upon during a meeting held 48 hours before last Thursday’s Finance Committee session, concerning a new formulation of Articles 3 and 13. What amendments has the IMF requested, and what changes have ministers introduced to the law?
The situation remains unclear for lawmakers discussing the draft Law on the Reform and Reorganization of Banks regarding the amendments requested by the IMF, those introduced by the government, and those made by the Ministers of Finance and Economy and approved by the Cabinet. This prompted the Finance and Budget Committee, at the request of participating MPs, including members of the Strong Republic Bloc, MPs Georges Adwan and Ghassan Hasbani, to ask the government to provide the IMF’s requested amendments in writing, or alternatively to invite IMF representatives to explain their demands. The committee also requested clarification regarding the changes made by the government to the draft law, as these modifications have become, in their view, a case of “mixing everything together.”
The 28 amendments requested by the IMF are divided, according to former Deputy Prime Minister and MP Ghassan Hasbani in comments to Nida Al Watan, into “minor observations and major ones.” The major amendments sought by the IMF concern issues related to the independence of Banque du Liban, governance arrangements, the discipline and functioning of the Higher Banking Authority, and clarifying its role in relation to that of Banque du Liban’s Central Council.
According to Hasbani, the amended version of the Law on the Reform and Reorganization of Banks includes the following:
An attempt to distribute the powers of the Governor of Banque du Liban among several other bodies within the central bank. However, the real problem is not the law itself but rather the erroneous practices and conduct that have not yet been held accountable. A new law, even if it redistributes powers, would also redistribute responsibilities, potentially obscuring accountability. For this reason, Hasbani argues that responsibilities should remain clearly defined and that members of the authority should be appointed as proposed in the current draft, without being affiliated with ministries, in order to prevent political interference in decision-making. Consequently, appointing representatives from the Ministries of Finance and Economy, for example, to the Higher Banking Authority is not an IMF requirement.
What are the IMF’s demands?
The IMF has called for the Higher Banking Authority to be independent, vested with broad powers, and empowered to make final decisions free from interference by any party. Therefore, the addition of seats representing the Ministries of Economy, Finance, and Justice to its membership would introduce political influence into the authority’s decisions; something that is not among the IMF’s demands.
The observations made by the Governor of Banque du Liban on the banking reform law will be taken into consideration, provided they do not conflict with IMF requirements. At the same time, they must remain consistent with the same guiding principles: preserving the independence of the central bank and maintaining clear lines of responsibility within Banque du Liban’s bodies and councils.
Further clarification is also required regarding amendments to the composition of the Higher Banking Authority (its second chamber), its role in comparison with the first chamber, the Central Council, and the role of the Banking Control Commission within each of these institutions.
In summary, lawmakers want to legislate amendments that do not conflict with IMF requirements so as to avoid future objections and the need to redraft legislation. Moreover, according to Hasbani, the law should not include “rider provisions” inserted under the guise of complying with IMF requirements while simultaneously passing unrelated measures.
Hasbani notes that there are provisions that “may have been amended without objection from the IMF and without affecting its requirements or views, yet they could still be criticized by MPs or rejected by the IMF once the final draft is reviewed. It is therefore preferable to obtain a clear picture of which amendments were requested by the IMF and which were introduced by ministers, and to verify whether these changes will receive IMF approval. Signing an agreement with the IMF is considered a gateway for Lebanon to secure external support, and any foreign investment in Lebanon will come within the framework of economic and banking-sector reforms.” However, he added: “As a parliamentary bloc and as MPs, we want to know exactly which amendments were requested by the IMF and to discuss the issues that raise concerns for us, even if the IMF itself does not object to them.”
The path of the draft law
For context, the government approved the first version of the Law on the Reform and Reorganization of Banks in August 2025 and referred it to Parliament. The bill was then examined by the Finance and Budget Committee, which introduced amendments. Some MPs challenged parts of the law on constitutional grounds, leading to the partial annulment of certain provisions.
The draft was subsequently submitted to the IMF, which stated that the original version was unacceptable and that a clearer text was needed regarding loss distribution, stronger protections for small depositors, and alignment with international standards.
The draft law was then returned to the government, where the Ministers of Finance and Economy reviewed its provisions and introduced further amendments. The revised version was approved by the Cabinet and forwarded to Parliament’s General Assembly. This prompted MPs, including members of the Strong Republic Bloc, during a Finance and Budget Committee meeting, to request a copy of the amendments made to the draft in order to determine whether the latest changes comply with IMF requirements or serve political interests.
This means that two types of amendments have been made to the draft law: one that aligns with IMF demands, and another introduced by ministers without lawmakers being informed of either set of changes. According to Hasbani, it is “as if the Ministers of Finance and Economy are the ones conducting negotiations with the IMF and introducing amendments accordingly.”
The impact of recognizing the crisis as systemic
What about the IMF’s recent acknowledgment that Lebanon’s crisis is systemic? Does this affect the drafting of the bank restructuring law or the financial regularization law?
There are two types of banking collapses:
First, the mismanagement of one or two banks by their directors and administrators, leading to their failure.
Second, when the state borrows from commercial banks and from Banque du Liban and fails to repay its debts, causing the collapse of the entire banking sector. In such a case, responsibility cannot be attributed solely to bank owners. The crisis is then classified as systemic, and all parties, including Banque du Liban, must share in the losses, not just the banks.
“In Lebanon’s current situation, the crisis is considered systemic because it is not confined to a single troubled bank; therefore, banks alone should not bear responsibility,” Hasbani said.
It is not necessary for the word “systemic” to be explicitly mentioned in the law for the crisis to be treated as such. What matters, he explained, is that this concept be reflected in the spirit of the legal provisions. If the law explicitly describes the crisis as systemic but the provisions themselves do not embody that principle, it will not be implemented in practice. Conversely, even if the term is not mentioned verbatim, the principle can still be applied if it is embedded in the provisions.
For this reason, Hasbani maintains that “the spirit of a systemic crisis is already present in the law, because the bank restructuring law addresses the treatment of multiple banks and links the implementation of its provisions to the financial gap law, which is directly related to the crisis.”
In this context, the Law on the Reform and Reorganization of Banks is expected to be approved within days, to be followed by discussions on the financial gap law, which has already been scheduled on the agenda of the Finance and Budget Committee.
