Report: Banks Say Ready to Cooperate on Rescheduling Debt

Lebanon’s banks on Tuesday expressed readiness to cooperate with the government in order to reschedule the state’s debt, a media report said.

“But they called on the government to negotiate with the foreign firms,” LBCI TV reported.

“The banks believe that it is better to negotiate with the foreign parties instead of not paying,” the TV network added.

A delegation from the Association of Banks in Lebanon meanwhile held talks with Prime Minister Hassan Diab at the Grand Serail, after which it announced that ABL backs whichever decision that might be taken by the government.

Diab had met with Speaker Nabih Berri in Ain el-Tineh ahead of his talks with the ABL delegation.

The premier had announced Monday that Lebanon’s final decision on whether or not to pay a $1.2 billion Eurobond debt that matures on March 9 would be taken Friday or Saturday.

“The decision will preserve the rights of small and medium depositors as well as Lebanon’s interest,” Diab said.

Lebanon is currently facing its worst economic crisis since its 1975-1990 civil war. The value of the Lebanese pound has plummeted on the black market, prices have risen, and many businesses have been forced to slash salaries, dismiss staff or close.

Lebanon is one of the most indebted countries in the world, with a public debt equivalent to 150 percent of its GDP. The country is now under pressure to pay a $1.2 billion Eurobond maturity on March 9.

Economists warn payment on time would eat away at plummeting foreign currency reserves, while bankers say a default would damage Lebanon's reputation with lenders.

Bank of America Merill Lynch in a November report estimated that around 50 percent of Eurobonds were held by local banks, while the central bank had around 11 percent.

Foreign investors owned the remainder, or around 39 percent, it said.

But these figures may have changed, with local media reporting that local banks have recently sold a chunk of their Eurobonds to foreign lenders.