A Predominant Banking and Financial Sector
p. 54-55
Texte intégral
1Service-related activities compose 70% of Lebanon’s GDP. Old and renowned, the banking and financial activities yet only accounted for 8% of the GDP (4.4 billion US$) in 2013, i.e. less than half of the amount of trade activities and less than the industrial production. In early 2015, they included 70 banking establishments (including 16 merchant ones), 10 representative offices of foreign banks, 53 financial establishments, 324 currency exchange offices and 40 credit institutions. The financial center that is Beirut has been strongly affected by Civil War. Its regional supremacy and role as an intermediary have been challenged, including by some Gulf cities. However, the qualities of its banking sector, guaranteed bank secrecy, and tax exemption for investment income still attract large amounts of foreign capital. This has become the necessary condition for sustaining a tremendous level of public debt (70 billion US$ mid-2015, 145% of the GDP) thanks to the investments in Treasury bonds.
A small link in the Arab and Western financial networks
2The majority of banks operating in Lebanon are of Lebanese nationality. Their number has been gradually decreasing (82 in 1982 to 53 in 2015), which may reflect either a form of fragility (bankruptcies, departures) or the consolidation of the sector (mergers). Above all, examining the shareholders reveals the highly international outreach of these banks, among others marked by the presence of Arab and Western investors, which illustrates the connections with the Gulf monarchies and Lebanon’s insertion into the globalized world. In 2014, all the shareholders coming from the OECD and who owned more than 20% of the shares of an institution were based in tax havens (Virgin Islands, Switzerland, Luxembourg, Delaware, etc.).
Figure III-10: Banking establishments in Lebanon
International expansion of the banking sector and offshore finance
3Investments oriented toward the production of tradable commodities have received limited support from the banking sector. The regional context, the need for funds used to sustain the debt and the stagnant level of wealth of the Lebanese residents have led the main banking institutions to develop a diversification strategy. For the past 10 years, several of them have expanded internationally, preferentially in other tax havens to improve their service-offering, or in countries with a strong diasporic presence to attract savings and increase their equity, among others. This renewed interest in the diaspora groups echoes the growing political considerations that have emerged regarding them (voting rights, naturalization, etc.). The State and the banking community have long had a symbiotic relationship, characterized by respective obligations, and which has dominated and influenced the entire economy.
Figure III-11: Presence of the Lebanese banks abroad since 1974
Restructuring and development of the national banking sector
4Deprived of its Central Business District, the international financial center of Beirut emerged weakened and divided from the war (new districts emerged in Hamra, Dora, and Ghobeiri). However, the provision of banking services has increased, and the corresponding networks have become denser (from 424 branches in 1981, including 39% in Beirut and 22% in its suburbs, to 964 in 2014, including 25% in Beirut and 27% in its suburbs).
5 This expansion indicates a growing access to banking services among the resident population in Lebanon (32% in 2010, 50% in 2015). For the past 20 years, this access has been boosted by the spread of ATMs and electronic payment terminals, mostly in Beirut and Mount Lebanon.
Figure III-12: Figure III-12: Evolution of the banking network in Lebanon 1981–2015
6Meanwhile, the current value of the debt of the Lebanese private sector (companies and households) has tripled since 2007. This increase is due to capital inflows, lenient credit standards and the three stimulus packages implemented by the Central Bank since 2013, which have constituted major incentives to get mortgage loans and increase consumption expenditures. Businessmen and politicians themselves have engaged in speculative real estate investing. As of now, at least 42% of the volume of loans are devoted to activities related to real estate while investments in the industrial and agricultural sectors remain very limited.
Figure III-13: Evolution of the sectorial distribution of bank credit from 2007 to 2014
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