Banque du Liban (BDL) Intermediate Circular No 13087 (Basic Circular #521)

Banque du Liban (BDL) Intermediate Circular No 13087 (Basic Circular #521) dated 18th of July 2019 amending Intermediate Circular No 7776 (Basic Circular #81) dated 21/02/2001 on the operations of financial institutions that are related to credit, investment, shareholding and participation.

In the course of what appears to be a concerted and coordinated action with the authorities to fight tax evasion, Banque du Liban (BDL) has issued an Intermediate Circular No 13087 (Basic Circular #521) dated 18th of July 2019 (here below), that amends Intermediate Circular No 7776 (Basic Circular #81) dated 21/02/2001 on the operations of financial institutions that are related to credit, investment, shareholding and participation. The Circular prohibits banks and financial institutions from extending or renewing credit facilities to an institution or company that generates an annual turnover of LBP 1,500,000,000 (equivalent to US$ 1,000,000) or more, unless the firm fulfils the two hereinafter cumulative conditions:

  • the company has to submit to the bank its audited financial statements (balance sheet, income statement, P&L and cash flow statement), which the bank will use to assess the company’s credit profile.
  • the circular stipulates that the financial statements that a company submits to the bank should be identical to the ones submitted to the tax authorities.

The circular indicated that banks and financial institutions have until the 30 of September 2020 to comply with the new requirements. It added that banks and financial institutions should ask existing clients to immediately pay the amount of their outstanding credit facilities, if these clients fail to regularize their files by end of September 2020 deadline. In case a company does not comply with the bank’s request to settle its outstanding credit facilities, the bank will have to place at BDL an amount equivalent to the credit facilities of the company. This amount has to be denominated in the same currency as the credit facility and will be placed in a blocked non-interest bearing account at BDL until the non-compliant company regularizes its situation.

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