The History of Establishment of Bank of Lebanon

Following the downfall of the Ottoman Empire in September 1918, the Turkish Pound was replaced by a Sterling based Egyptian currency as legal tender in the states under the French and British mandate. The Egyptian Pound was make outd by a private British institution, the National Bank of Egypt, and had been previously used by the British, since much of their supplies were from Egypt.After taking Lebanon and Syria under its mandate, the French disposal sought the replacing of the Egyptian currency in order to alleviate the burden on the French Government in covering its expenditures in Egyptian Pound, and to assert its liberty from the British. However, the use of the post war French Franc would have further exhausted the French Treasury.The alternative was to grant a moneymaking(prenominal) till the exclusive secure to issue a currency for the States under Mandate.The Banque de Syrie, a French company affiliate of the Ottoman bank, was established in 1919 with an initial capit al of FF. 10 million, by and by increased to FF. 25.5 million. Of its 51 thousand shares, about 22% were owned by the Ottoman bank and 78% by French shareholders.1924-1964 The Banque de Syrie et du LibanIn January 1924, a design was signed between the Banque de Syrie, and Lebanon and Syria as States under the French Mandate, following the constitution of their national government.As the political status of Lebanon evolved, the Banque de Syrie, which was to act as the official bank of the states under the French Mandate, was renamed the Banque de Syrie et du Liban (BSL).BSL was granted the following privileges by the 1924 Convention includingThe touch on right to issue the French-based-Lebanese-Syrian currency in Lebanon and Syria for 15 years, at FF. 20 to the pound. These could be redeemed at the main office in Paris or its branch in Marseilles.Special rights regarding securities pledged as loan guaranteesThe sole cargo area of government fundsPreference for its services with l ocal governmentsThe issue of the Lebanese-Syrian currency were governed by the 1924 Convention and covered byGold and convertible foreign government bondsMandatory French Franc interest earning depositsOther (optional) French Franc demand depositsClaims drawn on or guaranteed by the French governmentTwo years ahead the expiry of the 1924 Convention, BSLs privilege to note issue a Lebanese currency in Lebanon, scatter from the Syrian currency, was extended for another 25 years by the 1937 Convention, ending in March 1964.The notes issued by BSL were no longer subject to a ceiling but were subject to an obligatory and optional coverage. They were of two series one carrying the name Lebanon and the other Syria, but both could be used indiscriminately in either state.Although the currency was Lebanese in name, it remained a hide French Franc, until 1941 when it was linked to the Sterling Pound after the defeat of France and the invasion of Lebanon by the allied forces. However, the coverage of the Lebanese Pounds issues was still in French Francs, which was endlessly depreciating or devaluated.Lebanon was to collect any loss in the value of its assets in French Francs covering the issue of Lebanese notes by the Franco-British agreement of 1944. The like burden on France and Lebanons will to achieve fiscal independence, necessitated a dissociation between the Lebanese Pound and the French Franc.Following its independence in 1943, Lebanon think a monetary agreement with France in 1948 separating its national currency from the unstable French Franc, and asserted the independence of its monetary system by promulgating the Monetary uprightness of 1949.Concurrently, the distinction between the disregard Department and the Commercial Department was fully effected. In April 1963, a commercial bank, the Societe Nouvelle de la Banque de Syrie et du Liban s.a.l. was created to replace the Commercial Department, and in April 1964, the Issue Department was transforme d into the Banque du Liban.Banque du Liban (BDL) was created by the Code of Money and Credit enacted by decree no. 13513 dated August 1, 1963. It started its effective operations on April 1, 1964.BDL is a legal entity of public law enjoying financial and administrative autonomy but is not subject to administrative regulations and supervisions applicable to the Public sector.Its initial capital was LL.15 million, an derive appropriated by the State.BDL is the sole custodian of public funds and is vested by law the exclusive privilege of issuing the national currency.BDL includes an administrative body and a managerial body, as headspring as other specialized entities. The Government Commissariat supervises it.As stipulated in article 70 of the Code of Money and Credit, the Banque du Liban (BDL) is mainly bear on with the safeguarding of the currency in order to ensure a basis for sustained social and economic growth. Its basic responsibilities specifically includesafeguarding the currencymaintaining economic stabilitymaintaining and safeguarding the soundness of the banking systemDeveloping the money and financial markets.To fulfill its major functions, BDL cooperates with the Government to ensure exchange rate stability, control liquid, impose credit restrictions, and issue banking regulations.Cooperation with the Government involves coordination of fiscal and economic policy measures to ensure a certain harmony between its objectives and those of the Government, suggestions benefiting various economic variables to conjure economic growth, and advice on issues regarding the Lebanese currency.Exchange rate stability entails the use of all measures BDL sees appropriate specifically intervention in the market to buy and sell foreign currencies.The control of liquidity involves changes in discount rates, loans granted to banks and financial institutions, intervention in the foreign exchange market, open market operations, imposition of reserve requirements o n assets and/or liabilities as well as penalties for shortfalls in their formation, and/or the receipt of deposits from banks.It washbasin also affect the volume of credit and the general credit situation by find the volume of certain types of credits, credit granted for specific purposes, credit granted for specific sectors, and setting the terms and regulations of credits.BDL can issue regulations to ensure the soundness of the banking system. It can set, in consultation with the Lebanese Banks Association, regulations governing the relation of banks with their customers, and banks liquidity and capital adequacy. It has the power to regulate asset to liabilities ratios on all or selected banks to be met at a date specified by BDL.Banque du Liban (BDL), the central bank of the Republic of Lebanon, was created by virtue of Law No. 13513 dated August 1, 1963. Banque du Liban is a separate public legal entity not a governmental department and is vested with financial and administr ative autonomy. The management of the BDL is undertaken by a Governor assisted by quadruplet Vice-Governors, all together constituting the Governorship of the BDL, as well as by a aboriginal Board chaired by the Governor and composed of the Vice-Governors, the Director-General of the Ministry of Finance and the Director-General of the Ministry of Economy and Trade.The Banque du Liban is the sole custodian of public funds, supervises and regulates the banking system and is vested by law with the exclusive authority of issuing the national currency. The BDLs primary role is to safeguard the currency and promote monetary stability, thereby creating a favorable environment for economic and social progress. The Banque du Liban also advises the Government on various economic and financial matters. In conducting its monetary management function, Banque du Liban utilizes a wide range of instruments, including reserve requirements on Lebanese Pound deposits with commercial banks, liquidity requirements on US Dollar deposits in commercial banks, Treasury Bill repurchase and swap agreements with commercial banks, as well as Lebanese Pound denominated certificates of deposits issued by the BDL.As a result of higher(prenominal) rising prices prior to 1992, the Lebanese economy became substantially dollarized. Since October 1992, monetary policy has been targeted at stabilizing the Lebanese Pound exchange rate and controlling the inflation rate and money growth. The return of confidence in monetary stability and the high returns on investment in LBP-denominated financial securities led to a evidentiary decline of the dollarization of the economy and to a build up in foreign exchange reserves.The Banque du Liban is managed by the Governor who is assisted by four Vice-Governors, as well as by the Central Council.The Governor is the legal representative of the Banque du Liban, and has extensive authority on the management of the Bank. He is entrusted with the enforcement of the Code of Money and Credit, and the implementation of the Central Councils resolutions. Upon the suggestion of the Minister of Finance, the Governor is appointed by decree sanctioned by the Council of Ministers, for a renewable six- year term.After the consultation with the Governor and upon the proposal of the Minister of Finance, the Vice-Governors are appointed by decree sanctioned by the Council of Ministers for a renewable five-year term. They assist the Governor in managing the Bank, carrying out functions specified by the Governor. In addition, they assume their duties as members of the Central Council.The Central Council sets the monetary and credit policies of the Bank, including money supply, and discount and lending rates. It discusses and decides, among other things, on issues concerning the banking and financial sectors, the establishment of illumination houses, the issuing of currency and on loan requests by the public sector entities. The Council decides also o n the rules and procedures that govern the staff and operations of the Bank, and on its annual figure and accounts.