Lebanon’s AM Bank suspended its membership of the country’s banking association on Friday over decisions “harming the banking sector” days after the association criticized an IMF draft deal with Lebanon in a letter many member banks were unaware of.
AM Bank said in a statement that its move was based on frequent “inappropriate decisions at the ABL,” the last of which was a June 21 letter from an advisor to the Association of Banks in Lebanon (ABL) to the IMF in which it called the terms of the IMF’s deal with Lebanon “unlawful” and “unconstitutional.”
Lebanon’s government clinched a Staff-Level Agreement (SLA) with the IMF in April that pledges $3 billion in financing over four years to help the country recover from a financial meltdown that has seen its currency lose more than 90 percent of its value.
A full agreement is conditional on Lebanon implementing a series of measures, including starting to restructure its banks which have locked the majority of depositors out of their hard-currency savings since a 2019 financial implosion.
AM Bank called on other banks to follow suit in suspending their membership in order to send a message to the leadership of ABL that “enough is enough.”
An ABL spokesperson did not immediately respond to a request for comment.
While a number of banks, including Lebanon’s Bank Audi and AM Bank, have said they disagreed with ABL’s letter, Lebanon’s banks have largely opposed the fundamentals of the IMF deal, which calls for limiting recourse to public resources to plug a roughly $70 billion hole in the financial system.
A government plan drawn up in concert with the IMF calls on banks to be first in line to bear the losses in the financial system, wiping out their capital.
Banks have instead called for using state assets to plug the gap, citing decades of wasteful spending by successive governments.