Banque du Liban: A Forensic Analysis
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Issam Fares Institute for Public Policy and International Affairs (IFI)
Abstract
The audit report conducted by Alvarez & Marsal on Banque du Liban (BDL) spanning from 2015 to 2020 exposes substantial mismanagement and financial misconduct. Governed solely by the Governor, BDL employed arbitrary accounting practices, concealed escalating losses, and partook in dubious transactions. The report underscores notable financial losses, a negative equity situation, and a $60 billion deficit in FX reserves by 2019 stemming from costly financial manipulations. These factors culminated in a severe banking crisis, compounded by inadequate liquidity management by banks and regulatory oversights by the government. To facilitate recovery, prompt legal and regulatory measures are imperative, necessitating a restructuring of leadership and enhanced accountability.
Description
The audit report conducted by Alvarez & Marsal on Banque du Liban (BDL) spanning from 2015 to 2020 marks the initial externally assessed review since BDL's establishment in 1964. The examination reveals instances of mismanagement within BDL under the sole governance of the Governor, characterized by arbitrary accounting practices, concealed losses, and unexplained seigniorage income. Notably, the report highlights questionable transactions involving substantial amounts and individuals linked to the Governor's family. BDL's flawed financial strategies resulted in a $60 billion deficit in foreign exchange reserves, triggering a banking crisis exacerbated by insufficient governmental oversight and mishandling of liquidity by banks. Despite the persisting financial turmoil, marked by frozen bank deposits and unaccountable officials, the report proposes a potential path to financial recuperation through immediate implementation of legal and procedural reforms, necessitating responsible governance.
Arabic version: مصرف لبنان: تحليل جنائي http://hdl.handle.net/10938/24539
Includes bibliographical references (page 20)
Arabic version: مصرف لبنان: تحليل جنائي http://hdl.handle.net/10938/24539
Includes bibliographical references (page 20)
Keywords
Lebanese Lira, Banque du Liban, Central bank policy, Financial collapse