US anti-Hezbollah rules draw concern from Lebanese banks
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.