As reported by Blominvest Bank, gold reserves rose 12% to $11.96 billion driven by increase in the price of gold to $1302.45 / ounce in December 2017 compared with $1158.24 / ounce, last year.
In financial sector, deposits surged by 16% ($13.3 billion), to $97.5 billion. There are different forms of deposits by the banks at BDL which include lira and dollar deposits, reserve requirements, and certificates of deposit (CDs). Also, The Central Bank doubled loans to the financial sector to $12.7 billion which added $6.3 billion to total assets.
After the financial engineering operations of 2016, the central bank’s exposure to the banking sector has improved. However, BDL had to provide short term bridge loans to some of banks which participated in these swap operations in order to top up their liquidity in dollars, because these banks joined the financial scheme, beyond their capacity in dollar liquidity. Today these banks try to collect additional funds by offering appealing interest rates on dollar deposits, in order to pay back the BDL bridge loans, according to a source.
The financial engineering operations were carried out between Banque du Liban (BDL), Lebanon’s central bank and commercial banks in summer 2016 with the aim of strengthen banks’ balance sheet and to bring in new $-funds to BDL through banks.
According to a report from BDL, the financial engineering mechanism was performed as follows:
As stated on the same report, this scheme improved BDL’s balance sheet as well as Lebanon’s credit profile. Some of the main objectives were achieved by the financial engineering operations are:
Lebanon has a free market economy and non-interventional trade habit. However, it is struggling with negative consequences of regional conflicts such as Syria’s civil war and Iran-Saudi tensions, on the country’s economy. Lebanon tries to improve its economic situation by increasing investments and exports in 2018. Also, according to Bloomberg website, Lebanon is to sign an agreement with management consulting firm McKinsey & Co. in order to restructuring a new economic vision to improve banking and financial sectors as well as dealing with high rate of unemployment in Lebanon, Economy and Trade Minister, Raed Khoury, said.
Please do not hesitate to contact us if you wish to be guided with your Lebanon-related projects and business.
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