Lebanon banking sector, lebanese banks, lebanon crisis
Lebanese Banks have transformed to a sealed steel safe. (photo taken from Financial Times Report)

I’ve never been a financial wizard. Let me rephrase that. I’ve never gotten along with numbers. I’m not bad with numbers. I can do mental math. But once you start with the financial jargon and banking concepts, my mind will tend to tune out until a less tedious topic gets picked back up on my radar. But, if you live in Lebanon, you are forced to be somewhat literate in politics, and most recently economics and finance -depending, on which crisis of the aforementioned Lebanon is currently undergoing.

Right now that crisis would be a combustible cocktail of both politics and economics. Luckily the ever-so-savvy Lebanese always find a way to turn a disaster into an opportunity. Because Lebanon has no semblance of governance, no law and order, Lebanese feel obliged to take matters into their own hands, to preserve their own rights. We’ve seen this several times before, and most recently we see it with the banking crisis. A crisis which has seen Lebanon’s banking sector swallowed whole. And bizarrely enough, it’s still being handled with the same amount of eloquence and intelligence that got us here in the first place. Eloquence in the form of unofficial capital controls, to banking bullying, to the many, many devious dealings. Most notable of which would be the “business” of Banker’s check trading.

Some of the practices of this murky business entail buying checks at discount rates off of cash stripped sellers so that the buyer can in turn deposit the check at their correspondent bank and wipe off any debts they may have. Other practices include playing and betting on the margin of daily exchange. Even shadier is the business of buying a check off a willing seller and exchanging it with an exchange dealer at 60-70% haircut of the checks original value. These are just some of the many practices of this mischievous market. The deeper you stick your head into this hole to get a better look, the more you realize it is in fact a rabbit hole. And falling in means falling into a never-ending spiral down the dark and cloudy wonder world of what has become of the banking sector in Lebanon.

As I hear these stories of sellers offloading checks, and buyers hoarding them, I realize it has very much become a full-blown trade, and a new norm. As many Lebanese reel from the lack of economic opportunities in the country, they have resorted to this underground black-market business of speculative profits and dollar shaving to make money. Yet with all the grotesque features of this mind throbbing system, my mind can’t help but focus in on one important issue –who the hell is keeping track of all this?

“The deeper you stick your head into this hole to get a better look, the more you realize it is in fact a rabbit hole. And falling in means falling into a never-ending spiral down the dark and cloudy wonder world of what has become of the Lebanese banking sector.”

So far the only experience I’ve had with this subset of the banking market are the firsthand stories and experiences I’ve heard from the people who trade in it. And because the Governor of Lebanon’s Central Bank, Riad Salameh, refuses to even acknowledge that such a market exists, I am forced to rely on these firsthand accounts to gain any sort of insight into the market, and the banking sector as whole. A sector that was once the most fundamentally sound one in the region, to, today, one that resembles the Wild West.

What Lebanese don’t understand, or simply don’t care to understand, are the serious implications these practices have on our already deteriorated banking sector. Like I said I am no financial wizard, but even a financial wizard will struggle to fathom how congested the backend of this new black market of banking has become. How bottlenecked the systems at the banks are. Surely the books and figures must be so discombobulated in ways that could only resemble botched wiring. I would like to see the supposed expert make sense of all this. To try and provide answers to the many questions. For instance, how are the numbers in the banking sector being balanced out? How is debt being written off with such nonchalance? What sort of ripple effects does buying checks and cashing them at a discount rate have on the banking sector as a whole? What about the Banks themselves? How are they surviving all these debt write offs? What about people’s deposits? Or the overall structure of the Banking industry? What sort of implications does this have on the future of banking in Lebanon?

And the most important question, the only question that matters, is Lebanon’s once great banking sector truly beyond salvation? And if so, what do we do then? Do we, as a country, revert back to a barter system where you would trade 10,000,000 chickens for a brand new Porsche? I doubt it. The luxurious and glossy world of Porches don’t co-exist in the crude world of bartering. Instead, a lowly red wagon perhaps.

Yet what if there is hope. What if Lebanon’s banking sector can be saved? That it can be fixed! That there exists a man, or woman, that can steer the ship back onto the right course.

But why haven’t they started already? Before it becomes too late…

…Or is it too late?

I try to visualize what transpires inside the offices of Lebanon’s top banks, in the late hours of the night, behind those black steel doors sealed shut. I can’t help but imagine several banking employees crammed together in an office, with their sleeves rolled up and their shirts soaked in sweat, spending hours beyond hours running around in a frantic frenzy, shredding papers and burning documents, in a sea of commotion and hysteria. A scene eerily reminiscent to the Titanic, just as the ship began to sink. And just like the Titanic, in the midst of all this chaos, I imagine in those offices, a musical band still playing on their instruments. Trying to galvanize any semblance of calm. As they and we and everyone else, all go down with the ship.

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