After months of intense debate and political gridlock, Lebanese lawmakers have passed a crucial banking restructuring law, marking a significant milestone in the country’s efforts to revive its shattered financial sector. The move, reported by the Financial Times, is seen as a vital step toward meeting long-standing demands from international donors and the International Monetary Fund (IMF).
The legislation, approved late Thursday night, outlines how Lebanese authorities will handle insolvent banks and establishes a commission to oversee the overhaul of the banking system—crippled by the 2019 financial collapse that wiped out over $70 billion in assets and triggered one of the worst economic crises in modern history.
The IMF has repeatedly stressed the importance of this law for any potential recovery deal, calling it a foundation for reforms that could unlock desperately needed foreign aid. Lebanon’s currency has lost more than 90% of its value since the onset of the crisis, and depositors remain unable to access their savings.
However, the new law will remain dormant until parliament passes a second, more controversial piece of legislation known as the “financial gap” bill. This pending measure will determine how losses are distributed between the state and the banking sector—an issue fraught with political tension.
“This kind of legislation is overdue,” said Ibrahim Kanaan, chair of the finance and budget committee. “It’s the first step towards getting out of this mess . . . But we should not forget the elephant in the room, which is the gap law.”
The Financial Times highlighted the internal struggle that delayed the restructuring law for months. Disputes between the central bank, the Ministry of Finance, and members of parliament focused on the makeup and authority of the commission tasked with overseeing bank reorganizations.
MP Mark Daou, who served on the finance sub-committee, noted that the debate centered on the central bank’s role in the new body. “Are we encroaching on the independence of the central bank,” he asked, “or are we empowering the central bank beyond any means of being contained?”
The final structure closely mirrors a proposal from central bank governor Karim Souaid, giving the central bank significant sway in deciding the fate of defaulting banks. This sparked concern among some lawmakers, including MP Paula Yacoubian, who warned of repeating past mistakes. “We’re giving him superpowers,” she said, referencing the central bank’s expanded authority and invoking the legacy of Riad Salameh, the former governor now imprisoned for alleged financial misconduct during the 2019 collapse.
Despite these concerns, proponents argue the law is a crucial signal to the international community that Lebanon is finally moving toward accountability and reform.
The law’s passage comes as Lebanon’s newly installed government—formed in the wake of last year’s conflict with Israel and Hizbollah—faces growing pressure to implement structural reforms and secure reconstruction funds from foreign donors.
While the restructuring law sets the stage for change, its real impact hinges on the success of the forthcoming financial gap legislation. Until then, Lebanon’s economic recovery remains far from guaranteed.
