16 November 2016
BEIRUT: The Central Bank’s financial engineering was definitely a boon for Lebanon’s bank sector, as assets growth in the first nine months of 2015 jumped by more than 100 percent compared to the same period of 2015, a report by Bank Audi showed.
One banker who spoke on condition of anonymity told The Daily Star that there had been a huge inflow of funds to Lebanon from abroad in the past few months.We have seen an unusual inflow of funds thanks to the Central Bank financial engineering,” the banker said.
Consequently, customer deposits saw high growth in the same reporting period. “Total deposits, a traditional activity driver in the sector, were positively impacted by the monetary policy that enabled banks to offer their customers attractive deposit packages. As a result, total deposits rose by $6.6 billion in the first nine months of 2016 (4.3 percent), after having lagged behind in earlier months, comparing to a lower $4.7 billion increase in the first nine months of 2015. Resident deposits accounted for 82 percent of the total deposit increase in the covered period (growth 27 percent), while non-resident deposits were 2.7 times higher than those of last year’s similar period,” Audi said.
This financial engineering dramatically beefed up the Central Bank’s foreign currency reserves.
“The first nine months of the year 2016 were characterized by a historical high level of the Central Bank of Lebanon’s foreign assets, a shift in the growth in net foreign assets from a negative territory to a positive one year-on-year, a strong money creation, and a tangible increase in foreign currency CDs portfolio, mainly supported by BDL’s recent financial engineering operations,” Audi said.
It added that the Central Bank’s foreign assets reached an unprecedented level of $40.6 billion at end-September 2016, rising by a significant $3.5 billion since year-end 2015.
“In parallel, the foreign sector reported an improvement in activity on the back of the recent BDL financial engineering operations that resulted in a noticeable growth in financial inflows over the first nine months of the year, generating a surplus in the balance of payments of $555 million.
The surplus of the balance of payments comes with the context of a 36.3 percent rise in financial inflows offsetting the 9.3 percent increase in trade deficit that was driven by growing imports and contracting exports,” Bank Audi said.© Copyright The Daily Star 2016.
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