Dubai PR Network, Online Press Release from Dubai and Middle East
 
Banking & Insurance(Banking & Investments)
Filter PR by
  
Lebanese Banks Face Risk of Another Lehman-Type Failure
 

By Firas Sleem, CEO, Virtue Consultancy


Dubai, United Arab Emirates, March 18, 2020:   September 2008 marked the collapse of the Lehman Brothers and a subsequent global financial crisis that shook the world. 


The bankruptcy of Lehman Brothers did not only affect the United States but 23 other countries around the world according to the International Monetary Fund. These countries endeavored to rescue their failed banks and boost their economies by raising their public debt to more than 30 percent of their GDP.
For one thing, the 2008 credit crunch and recession resulted from years of deeply rooted weak spots in the global economy. At that time, economists were not able to foresee what was going to happen. But speaking about Lebanon nowadays, local banks are not excused for their reckless risk-taking and not learning from past mistakes across the world. A bruising downturn is that a bankruptcy of any bank in Lebanon currently will threaten the economy of the entire Lebanese state due to the organic relationship between the two. 


Traditionally, local banks in Lebanon have freely put a large percentage of their depositors’ money in government bonds and the Lebanese government announced its intention to restructure these debts. Considering the current situation, this is a serious threat, as other countries in the world have experienced a collapse though their debt ratio to the size of their economy was relatively much lower than that of Lebanon’s.


Alongside this, reducing the country’s credit rating will make corresponding banks, which are still dealing with local banks, minimize their work together. This will reinforce the risk to banks’ bankruptcy in Lebanon as central bank will not be able to extend any failed bank with liquidity, through its reserves. This will lead that a bank falls one after another, like a domino effect. Economists and bankers have been warning about this threat since 2011 as the organic relationship between private banks and state finances will harm both parties, and depositors will have to bitterly bear the consequences of the potential collapse. 


Local banks in Lebanon were rushing to lend to the government against high interest rates, which subsequently burdened the public finances. With decline in foreign investments and weakened confidence in the local economy, the financial situation has entered a vicious circle going from bad to worse.


Local banks have always viewed government sovereign bonds as less risky than lending private sector believing that government is a guarantor in all cases. However, the Lebanese government has dismissed this belief announced this month the restructuring of the Eurobonds debts which result lowering the credit rating of the three (Fitch, Standard & Poor’s and Moody's) to the point of ‘total default’ and subsequently facing risk of another Lehman-type failure that Lebanon wouldn’t be able to contain.

 


Posted by : Dubai PR Network Editorial Team
Viewed 7046 times
PR Category : Banking & Investments
Posted on : Wednesday, March 18, 2020  5:56:00 PM UAE local time (GMT+4)
Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of DubaiPRNetwork.com.
Previous Story : COT: Commodities See Demand for Metals and Agriculture
Next Story : Al Wifaq International Islamic Bank Selects ICS BANKS ISLAMI...
Email this article Print this article

Share this article with your friends and followers
NewsVine
Back to Section Home

Related Stories



 
 
Most Viewed Press Release posted in the last 7 days
Parmigiani Fleurier Launches New Tonda Reine De Mai [5330-Views]
Make Up for Ever is Breaking Through With a Lipstick Revolution With Rouge Artist [4604-Views]
World Gold Council and its Members Highlight Commitment to Sustainable Development Goals ... [3210-Views]
Kantar to Launch the First BrandZ Top 30 Most Valuable Emirati and Saudi Brands [3075-Views]
WCU: Saudis Talk Up Oil; Strong Grain Momentum Continues [2956-Views]
Pasha de Cartier - ITW w/Ambassadors [2956-Views]
Iba Cosmetics Launches in the Middle East [2952-Views]
Danube Home Launches Its All New “My Garden 2021” E-Catalogue! [2936-Views]
Dubai Health Authority and Dubai Healthcare City Authority Sign MoU to Strengthen Partners... [2571-Views]
WTTC Launches New Report on the Future of Travel & Tourism in a Post-COVID World [2501-Views]
Be Flawless Trend Edition by essence #MinaXessence [2435-Views]
Back With a Bang: IMAGINE Returns to Dubai Festival City Mall's Festival Bay [2173-Views]
Aspiring Novelists Take Note: The Emirates Litfest Writing Prize is Now Open for 2021 [2148-Views]
5 Simple Ways to Amp Up Your Denim Game for Under AED 100 [2120-Views]
Etihad Airways Celebrates Its Pledge To the Kingdom of Saudi Arabia on Their 90th National... [2075-Views]
Dubai Festival City Mall Launches 2nd Edition of Dubai Home Festival [2070-Views]
Emirates SkyCargo Signs Humanitarian Logistics MoU with International Humanitarian City [2070-Views]
Ras Al Khaimah International Airport Has Secured the Repatriation of 53,000 Indian Citizen... [2066-Views]
Parmigiani Fleurier's New Tonda GT Line' [2009-Views]
New-in Comfy and Trendy Maternity Pieces from Mummyista [1935-Views]
Dubai Culture Reveals Children's Wishes in ‘My Library & Expo' Time Capsule [1911-Views]
Homegrown Concept NÜWATER – The UAE's First Alternative to Plastic Bottled Water [1898-Views]
Sony World Photography Awards 2021 Judges and New Competition Categories Announced [1837-Views]
Range Rover Velar Electrifies With Plug-in Hybrid and State-of-the-Art Infotainment [1751-Views]
Marhaba! Abu Dhabi Offers a Welcome Return to UFC Fight Island for Global Stars [1751-Views]
 
RSS Facebook Twitter LinkedDin
 
Top Sections
 
Top Stories