Talks in Paris ended on Thursday, 30 October, with Lebanon's central bank, the Banking Control Commission and bank representatives still divided over how to restructure the country's collapsed banking sector, according to reporting by Asharq Al-Awsat English. At the centre of the dispute sits an International Monetary Fund demand that any bank wishing to keep operating must reach a 15% capital adequacy ratio within five to seven years.
For anyone who has followed Lebanon's financial collapse, this is not a technical quarrel between accountants. It is a fight over who pays for a crisis produced by decades of elite accumulation, sectarian state capture and imperial creditor discipline, and the IMF's answer, as so often, is that shareholders come first in absorbing losses while depositors, workers and ordinary households wait their turn.
What happened in the Paris talks
The meetings were hosted by Rothschild, the international adviser to Banque du Liban, in an effort to reconcile competing approaches to the draft Financial Regularization and Deposit Recovery Law, which the government sent to Parliament late last year. Asharq Al-Awsat reports that the discussions produced new proposals involving mostly cosmetic changes to the draft, though these are expected to shape the next stages of the legislative process.
What did not move was the IMF. Its delegation reportedly held firm on two principles: limiting the use of public funds, and preserving the hierarchy of loss absorption, under which bank capital, shareholders and equity holders are first in line to bear the losses. On top of that, the Fund added a fresh requirement, telling banking executives that a 15% capital adequacy ratio is a core condition for staying in business.
A source familiar with the matter told Asharq Al-Awsat that the Fund stipulated a window of five to seven years from the start of restructuring. That figure is well above what Basel III standards demand, and the IMF argues it is necessary for the banking sector and BDL as its regulator to show they are serious about addressing the consequences of an unprecedented financial crisis.
Why the 15% requirement looks impossible
Here is where the numbers become political. Preliminary estimates cited by Asharq Al-Awsat suggest banks would need to raise roughly twice their current capital, a base that has collapsed from levels exceeding $20 billion following the Lebanese pound's implosion. The Lebanese daily An Nahar has reported that banks' exposure to the sovereign, in local debt and Eurobonds, already amounts to some 55 trillion Lebanese pounds, nearly double the banking system's 30 trillion pound capital base.
Existing shareholders are refusing to inject fresh money before a final IMF agreement is reached, before the government meets public sector reform requirements, before a medium-term fiscal plan exists, and before the outcome of Eurobond restructuring is clear. That refusal is rational from their side, but it leaves the sector paralysed while the economy around it burns.
All of this unfolds against a financial gap the government estimates at roughly $70 billion, compounded by wars, reconstruction costs and what Asharq Al-Awsat describes as an exceptional contraction in investment inflows. Insisting on this approach, banking officials warn, could sink the sector's prospects for recovery and its capacity to contribute to any broader economic rebound.
Who actually pays for the crisis
Banking officials argue the IMF's framework ignores the state's responsibility, including the government's decision to suspend repayment of all Eurobond obligations, which they say deprived both commercial banks and the central bank of vital financial assets. One financial official, speaking to Asharq Al-Awsat, insisted that BDL's response requires balancing two connected principles: a fair distribution of losses and the avoidance of sacrificing financial institutions outright.
That language deserves scrutiny. A