US anti-Hezbollah rules draw concern from Lebanese banks

Friday 15/01/2016
Banks Street in Beirut Central District.

Beirut - New US rules to penalise financial institutions conducting transactions with Hezbollah are wor­rying Lebanon’s banks and the Iranian-backed Shia mili­tant group.
Hezbollah is reportedly keen to keep Lebanon’s banking sector go­ing but does not want a new US law to target possible sympathisers while the banks — the most stable sector in an unstable country — say tensions about the matter would be limited and contained.
The new rules direct US officials to prescribe punishing regulations against financial institutions that conduct transactions with Hezbol­lah or otherwise launder funds for the organisation. The law requires the US administration to present to Congress a series of reports high­lighting the group’s alleged narcot­ics trafficking, transnational crime and operations of international groups linked to it, especially in Latin America, sub-Saharan Africa and Asia.
Hezbollah Secretary-General Has­san Nasrallah called on Lebanese officials to “be men” and refuse to comply with the US law, but still claimed that Hezbollah “will not be harmed at all” by the measure since the party has “no money in Leba­nese banks, does not transfer mon­ey in Lebanese banks and has no trading companies or partnerships in any Lebanese or non-Lebanese companies”.
The Lebanese As-Safir newspa­per, regarded as sympathetic to Hezbollah, reported on December 23rd that banks had begun taking measures against Hezbollah mem­bers, including parliamentarians.
A large bank, As-Safir said, tried in November to close an account through which a Hezbollah member of parliament received his salary, prompting the personal interven­tion of parliament Speaker Nabih Berri and the issuing of a “serious warning” to the bank. The case was one of several “similar occurrenc­es”, the paper added.
One way the party may have got around the problem, to which it may have to resort more extensive­ly now, is by conducting financial transactions in cash or means out­side of the official banking system, economic analysts say.
“There are no official banking ac­counts belonging to Hezbollah and banks are free to say no to any sus­picious client,” the owner of a large bank said, speaking on the condi­tion of anonymity.
“We, Lebanese bankers, are defi­nitely worried about being sanc­tioned by the Americans but we do not foresee a major crisis. A small number of cases may arise and will be dealt with,” he added, refusing to comment on As-Safir’s report.
Lebanon’s Central Bank estimat­ed total bank deposits at $151 billion by the end of 2014, with a dollarisa­tion ratio of 65.7%. Lending activ­ity registered 7.6% growth during 2014, with total credit to the private sector exceeding $52 billion in De­cember 2014. The loan dollarisation ratio continued a downward trend, reaching 75.6% at the end of 2014, its lowest recorded.
Marwan Iskandar, a Lebanese economic analyst, said he does not expect a clash between Lebanon’s banks and Hezbollah. “Any bank can say to any client, ‘We cannot serve you,’” he said. “On the other hand, if the client is close to Hezbol­lah, sensitivities may arise. How­ever, I do not see the banks in any danger.”
Iskandar said an international ap­proach is needed to stop the United States from “imposing its laws on the world”. Clearances of interna­tional transactions in US dollars must be overseen by US authorities, he said, estimating that such deal­ings amount to 65% of the total.
Recalling US fines imposed on Swiss banks in recent years for facili­tating US tax evasion, he noted: “On the other hand, no similar US actions are seen against China, which holds $1.4 trillion worth of US Treasuries.”
“The sanctions may have a sig­nificant impact on individuals and institutions close to Hezbollah,” said Kamel Wazni, a Lebanese economic analyst. “On the other hand, I do not expect the banks to risk losing cur­rent or new deposits by Lebanese expatriates.” He estimates that Leb­anese living abroad have $31 billion deposited in Lebanese banks “and a good chunk belongs to Shia expatri­ates”.
“Hezbollah itself is interested in keeping the Lebanese banking sys­tem stable and is not interested in a banking crisis,” Wazni said. “The group, however, does not want any of people who are believed to sym­pathise with it to be ill-treated by a bank or face any dangers regarding their financial affairs.”
Clients rebuffed by a bank can re­sort to transactions in other interna­tionally clearable currencies, such as the euro or yen, another banking source told The Arab Weekly, cau­tioning that international dealings in substitutes to the dollar are not always acceptable all over the world. Wazni warned that clients deemed close to Hezbollah might resort to depositing money outside Lebanon if irritated by Lebanese banks.