As part of its advocacy efforts towards building a people-centered and sustainable recovery from the Beirut port explosion and its endeavors to promote inclusive and equitable social justice, as well as foster trust between individuals, entities, and the Lebanese government, the Lebanese Center for Policy Studies (LCPS) partnered with Transparency International (TI) and its local chapter, Transparency International Lebanon – No Corruption, to issue “The Reform Monitor.” The topics covered by the monitor are linked to the areas of reform, recovery, and reconstruction (3RF). The monitor falls within the Building Integrity and National Accountability in Lebanon (BINA’) project, which is funded by the European Union. The views expressed in the monitor do not necessarily reflect those of the donor.

WHAT’S THE ISSUE AT HAND?

Lebanon’s financial crisis, which erupted in late 2019, has left the country’s banking sector paralyzed. With commercial banks unable to honor their obligations, the Central Bank of Lebanon (Banque du Liban, BDL) has relied on a series of circulars to regulate depositors’ access to their savings. As of 2025, these circulars continue to shape daily financial life, underscoring that the core crisis remains unresolved and continues to affect both households and businesses.

These measures effectively froze most foreign currency (mainly US dollar) accounts and forced withdrawals in Lebanese lira at heavily devalued exchange rates, leading to a drastic erosion in the real value of savings. The collapse of the official exchange rate system and the free fall of the lira further deepened the loss of confidence in the financial system and wiped out much of the population’s wealth.

A circular, in this context, refers to an official instruction issued by BDL to banks, outlining how to manage deposits, withdrawals, and currency conversions. While not a substitute for formal legislation, these circulars became the de facto regulatory framework for managing deposit access, as repeated efforts to pass a capital control law since 2020 have failed.

In 2021, an LCPS Government Monitor examined BDL Circulars 148, 151, 154, and 158. These circulars attempted to provide limited relief while preserving liquidity, but they imposed implicit “haircuts”—a term that means depositors could withdraw their money only at a fraction of its original value, effectively losing part of their savings.

Four years later, the framework has become even more complex. Additional circulars 161, 165, 166, and 170 have been introduced, while temporary exemptions were granted during the October 2024 war. Court rulings and reforms to the banking secrecy law have added new layers of uncertainty and accountability.

This monitor reviews how BDL’s circulars evolved since 2021, analyzes their impact on depositors and financial stability, and highlights the policy choices needed to move toward a more transparent and sustainable framework.

Coping with the collapse

Circular 158, issued in June 2021, was one of the most significant measures. It allowed eligible depositors to withdraw $800 each month, but this was split into $400 in dollars and $400 in Lebanese pounds (LBP) at a preferential rate. Over time, adjustments were made so that the entire $800 could be withdrawn in dollars, a change that took effect in June 2023 following BDL’s decision to phase out the lira component of Circular 158. This adjustment marked a modest improvement for depositors, as it reduced their exposure to losses from currency depreciation, although it did not fundamentally change the fact that most accounts remained inaccessible.

In April 2023, BDL issued Circular 165, which sought to regulate electronic cash settlement operations. Since late 2019, BDL has differentiated between ‘fresh’ money, which are new funds transferred from abroad or deposited after the crisis, and ‘old’ money deposited before it. This distinction determines which accounts are eligible for withdrawal schemes and preferential rates.

However, the circular also gave BDL broader control over settlements and soon became controversial. In 2025, attorney Pascal Fouad Daher and a group of colleagues filed two petitions before the State Council seeking to dissolve Circulars 151 and 165, arguing that they violated Lebanon’s code of money and credit. The outcome of this legal challenge remains uncertain, but it underscores the fragile and contested legal framework governing Lebanon’s monetary measures.

Later in 2023, Circular 166 was introduced to provide a mechanism for the gradual repayment of foreign currency deposits to account holders who are not benefiting from Circular 158, allowing for monthly withdrawals of $400 (increased from previous limits).

During the October 2024 war, BDL temporarily relaxed restrictions under Circulars 158 and 166. Depositors were allowed to withdraw the equivalent of three-month payments at once. Between November 2024 and January 2025, the ceiling was doubled compared to the standard monthly limit. By February 2025, these exemptions were lifted, and the system reverted to its previous rules. Although these measures provided short-term relief in a moment of crisis, they also reinforced the impression that depositor access depended on exceptional events rather than stable policy.

By the end of 2024, BDL reported that 431,448 depositors had benefited from the two circulars since their respective launches, resulting in a total withdrawal of US$3.24 billion (L’Orient Today, 2024).

In July 2025, BDL issued Circular 170. While not directly focused on deposit withdrawals, it was significant for regulatory oversight. The circular prohibited banks, financial institutions, and any entities licensed by the central bank, including financial brokerage firms and collective investment schemes, from engaging in any financial, commercial, or other dealings with unlicensed money exchange institutions, money transfer companies, associations, and entities on international sanctions lists.

Finally, structural reforms also entered the debate. Parliament amended the banking secrecy law in 2022 and again in 2025, granting oversight bodies (including BDL, the Banking Control Commission, and external auditors) greater access to account data. At the same time, draft legislation on bank restructuring and deposit recovery gained traction.

Proposals currently under discussion at the government and parliamentary levels include the creation of a Deposit Recovery Fund to compensate depositors through zero-coupon bonds or phased payments, clarification of loss distribution among shareholders, large depositors, and the state, as well as requirements for bank consolidation and recapitalization. These proposals remain under consideration but indicate a gradual policy shift from reliance on temporary circulars toward more systemic reform.

Positive developments and challenges

Some progress has been made since 2021. Adjustments to Circular 158 increased the share of dollars available to depositors. Circulars 165 and 166 widened eligibilities for exceptional withdrawals, while the temporary easing of restrictions during the recent war demonstrated that BDL could respond quickly in emergencies, though implementation often varied across banks.

Circular 170 also marked an important regulatory step, bringing Lebanon closer to international Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) standards. Meanwhile, adjustments to the banking secrecy law and the discussion of a Deposit Recovery Fund signaled a gradual recognition that the crisis required structural solutions.

Yet, many challenges remain. The real value of withdrawals has been eroded by inflation and exchange rate depreciation, meaning depositors continue to suffer steep losses. Legal arguments over Circulars 151 and 165 highlight the lack of clarity and stability in the framework. And banks have implemented circulars unevenly, leaving depositors with unequal access depending on their institution.

The constant changes to rules and reliance on war-time exemptions have deepened public mistrust. Moreover, larger depositors remain heavily restricted, raising concerns about fairness and property rights. By postponing comprehensive reform, reliance on circulars has provided only limited and short-term liquidity, insufficient to revive credit markets or stimulate real economic activity.

This stopgap approach has come at the cost of worsening inflationary pressures, undermining financial stability, and delaying a solid economic recovery. Restoring public confidence now hinges on moving beyond circular-based stopgaps toward lasting legal and institutional reforms capable of rebuilding trust in Lebanon’s financial system.

WHY IS THIS IMPORTANT?

The regulation of deposit withdrawals is central to Lebanon’s reform, recovery, and reconstruction priorities. Without a fair and predictable framework, depositor confidence cannot be restored. This lack of trust has made people keep their money outside the banking system and pushed remittances to flow through cash or informal channels, weakening the role of banks in daily life. As a result, consumption, investment, and settlement flows have all suffered. International donors, including the International Monetary Fund, have emphasized that credible solutions to the banking crisis are a prerequisite for financial support.

The way Lebanon manages bank withdrawals is not only a technical issue but also a test of transparency, accountability, and fairness. Continued reliance on ad hoc circulars risks prolonging financial immobility, increasing poverty, and further eroding trust in both banks and the state. Addressing these weaknesses will be key to restoring confidence and rebuilding financial stability.

Recommendations

Lebanon should treat the current circulars as temporary measures until a comprehensive Government Action Plan (GAP) Law is adopted. This law, once passed, will clearly define how financial losses are distributed, what tools will be used, how small and large depositors are treated, and over what timeframe withdrawals will take place.

The priority now is to adopt the GAP Law and amend the Bank Resolution Law in line with international standards and IMF recommendations. This will replace the need for separate deposit recovery mechanisms and create one transparent, fair, and legally binding framework for all depositors.

Until the law is passed, the Central Bank should maintain transparency by publishing clear information on all active circulars and ensuring that rules are applied consistently across banks to protect public trust.