Lebanon stands at a familiar crossroads. After the Civil War (1975-1990), the country favored expediency over accountability, granting general amnesty to all those responsible for years of violence, letting them create the system that led the nation to the current devastation. Today, the ruling elites face the same choice. They can either extend amnesty to those responsible for the country’s financial, banking, monetary, economic, and social collapse, or embark on a path of reforms and accountability to rebuild a credible and just financial system that delivers prosperity for all rather than a privileged few.

Six years into the “deliberate” financial collapse that locked the Lebanese out of their bank deposits, impoverished large segments of the population, and weakened public institutions, Lebanon’s ruling elites have avoided implementing a fair, transparent, and comprehensive recovery plan. Instead, bankers, regulators, politicians and their allies have largely shielded themselves from scrutiny and prosecution in Lebanon and, when possible, abroad. Meanwhile, the population, the economy, and the state were left to shoulder the burden of such inaction.

Had it not been for the sustained pressure from the civil society and the engagement of external actors such as the International Monetary Fund (IMF), Lebanon would still be stuck at square one. Following the failure to adopt a credible recovery plan, the IMF conditioned its support on the passage of three laws aimed at placing the country on a path of recovery. First, the banking secrecy law, long used to shield bank accounts from legal scrutiny, was amended in April following a scathing rebuke from the IMF, substantially narrowing the scope of banking secrecy. Second, a bank resolution law establishing a framework for restructuring the banking sector was passed in July. Finally, a financial gap resolution law (the gap law), which is intended to determine and allocate losses stemming from the financial collapse, is currently being drafted. 

The stated goal of the [bank resolution] law is to protect deposits, foster financial stability, and limit the financial contribution of the state in the bailout

The bank resolution law, officially Law No. 23 of 2025 on Reforming and Reorganizing the State of the Banks in Lebanon, is meant to provide the framework for assessing the viability of the defaulting banks, leading to either their liquidation or restructuring. It is a process that will entail auditing banks to determine which ones are failing, or likely to fail, and which ones will survive. The stated goal of the law is to protect deposits, foster financial stability, and limit the financial contribution of the state in the bailout. However, it falls short of laying the necessary foundation to achieve these goals.

This article outlines the main shortfalls of the bank resolution law. It argues that the ruling elites—mainly the governor of the Central Bank of Lebanon, the banking lobby represented by the Association of Banks in Lebanon (ABL), and their allies in Parliament—shaped the legislation to protect banks and bankers. In doing so, the law ended up concentrating power in the hands of actors closely linked to the banking sector, minimizing depositor protection, and shifting the burden of the collapse onto the state and the broader economy. 

The control of the banking lobby

At its core, the law tasks the Higher Banking Commission with the restructuring of the banking sector. Yet, the Parliament’s Finance and Budget Committee, whose members are close to the banking lobby, amended the government’s original draft in ways that left the two chambers forming the Commission heavily influenced by banking interests.

Membership of the first chamber, which has the authority to impose sanctions on banks, now includes the president of the National Institute for the Guarantee of Deposits (NIGD), an institution dominated by commercial banks. The second chamber, which determines whether a bank should be restructured or liquidated, includes an economic expert appointed by the Council of Ministers. This expert is chosen from a list prepared by the “Economic Instances,” a body representing the interests of large businesses in Lebanon and which counts the ABL among its members. Additionally, the president of the NIGD, along with a representative of banks’ shareholders, are also appointed to the second chamber. 

That concentration of bank-affiliated appointments and the expansive authority retained by the Central Bank governor undermines the independence, impartiality, and legitimacy of the restructuring process

Under this arrangement, the Central Bank’s governor retains extensive powers in both chambers as he presides over them, with his vice-governors also assigned as members. This structure is similar to the all-encompassing powers that the governor has, which was allegedly one of the reasons for the financial collapse, as well as its subsequent deliberate mismanagement. 

It becomes clear, then, how banks and their allies have embedded themselves within institutions meant to operate as independent public bodies, tasked with sanctioning, restructuring, and liquidating the banks. That concentration of bank-affiliated appointments and the expansive authority retained by the Central Bank governor undermines the independence, impartiality, and legitimacy of the restructuring process. 

In order to preserve even a semblance of justice in a country already crumbling due to injustice and impunity, the bodies charged with overseeing and restructuring the banking sector must be free from individuals or entities with direct or indirect ties to the strong banking lobby and vested commercial interests. 

Influencing valuations

The law requires that bank valuations—the process of determining a bank’s true financial worth by assessing, among other things, its capital, assets, and liabilities—be carried out by experts appointed by the Banking Control Commission of Lebanon, the authority supervising financial institutions operating in the country. However, the law also stipulates that these valuations should abide by the requests and instructions of the Central Bank, which increases the influence of the governor of the Central Bank and reduces that of the Banking Control Commission. This creates another tool through which the governor of the Central Bank can influence the valuation process. Accurate, independent, and streamlined valuations are a cornerstone of any restructuring: anything short of a transparent valuation done at arm’s length will create opportunities for manipulation of asset values and loss allocation, and will result in the erosion of confidence in the whole process. 

Changes to the law by the Constitutional Council

The Constitutional Council, the body responsible for reviewing the constitutionality of laws, issued Decision No. 16 on October 3, annulling several provisions of the bank resolution law, after an appeal was filed by several members of Parliament.

In a positive development, the Constitutional Council annulled a provision that had required all lawsuits filed against banks to be tried in a special court that was envisaged by Law No. 110 of 1991 to rule on specific banking issues—a court that was never established. Ordinary courts already possess full jurisdiction and capacity to adjudicate disputes between banks and depositors. 

On the other hand, the Constitutional Council annulled a provision that had limited the right of banks to appeal the Commission’s decisions, granting them the right to appeal before the above-mentioned special court. While the right to appeal administrative decisions is guaranteed by the Constitution, the last six years have shown how banks and bankers use every conceivable tool, whether legal or otherwise, to sabotage any recovery efforts. One such tactic involves filing a stream of lawsuits to force the recusal of judges overseeing cases against them, effectively using courts to paralyze accountability and halt any judicial procedure that threatens their interests. Allowing banks an open-ended right of appeal against the decisions of the Higher Banking Commission effectively grants them a new procedural instrument to stall the restructuring of the sector even further. Crucially, this open-ended appeal mechanism is also likely to discourage new investments in the banking sector, which will be needed as part of the restructuring process, as investors will be wary of prolonged legal uncertainty and renewed challenges to banks’ ownership structures. If an appeal mechanism is to exist, it must be strictly limited to narrowly defined grounds and subject to tight time limits so as not to become another vehicle for delay. 

Mandating a non-existent special court to adjudicate cases and allowing the banks to indefinitely appeal the decisions of the restructuring authority is, in effect, a mechanism of delay: it freezes litigation, deters new investments, defers accountability, limits judicial scrutiny, and grants banks the procedural protection they have long sought. Instead of strengthening the rule of law and putting the banking sector on the right path, this design weakens depositors’ access to potential remedies and entrenches the imbalance between the banking sector and the public. 

Hierarchy of claims and financial gap law

While the bank resolution law addresses the order in which losses should be absorbed, its wording is vague leaving room for significant reinterpretation once the gap law, which will determine how the losses of the collapse are borne, is adopted. The gap law is currently the focus of intense lobbying by the ABL and allied business groups, mainly through the Economic Instances.

Moreover, conditioning the operational effect of the bank resolution law on the passage of the gap law hands the powerful vested interests (ABL and its allies) an opportunity to reshape the loss-allocation rules and further delay the effective implementation and restructuring of the banks. Parliament should ensure that the gap law does not become a vehicle for diluting the liability of the banks and bankers and should protect the assets of the state. 

Risking the recovery

The issues outlined above are only some of the major pitfalls of the bank resolution law that will materially impact how sustainable and fair the recovery plan will be. The risks of keeping the law as it stands are too high and would entrench the continuation of a failed zombie banking sector: financially insolvent yet operational, blocking the path to credible economic recovery. Just like these past six years, people will continue to distrust and avoid dealing with banks, and will increasingly rely on cash, expanding the informal economy, raising money-laundering risks, and deepening the country’s international isolation. Lebanon has already been placed on both black and grey lists worldwide, which has resulted in isolating the country and deepening its economic woes. Being placed on such lists leads, among other repercussions, to restrictions in relationships with correspondent banks, increasing costs of transactions, and discouraging foreign investment and inflow of capital. 

Without accountability, Lebanon risks entrenching a two-tier society, where the majority remains disenfranchised, while a privileged few retain disproportionate wealth and power

More importantly, the continuing pattern of impunity has deepened poverty and worsened inequality since 2019. Without accountability, Lebanon risks entrenching a two-tier society, where the majority remains disenfranchised, while a privileged few retain disproportionate wealth and power. 

Lebanon must break the cycle of collapse and impunity. Its experience should serve as both a lesson and warning to the rest of the world to avoid such a collapse and how not to respond in its aftermath. Instead of accommodating or even rewarding the perpetrators and enablers of the financial collapse, Lebanon should be laser focused on its people, their interests, and their future.

Fouad Debs is an activist and lawyer based in Beirut, Lebanon.