BEIRUT - An armed man demanding deposits frozen by his bank took five branch employees and one customer hostage on Thursday at the Federal Bank of Lebanon, branch manager Hassan Halawi, who is among those being held, told Reuters.

"I'm in my office. He (the hostage taker) gets agitated then calms down then gets agitated again," Halawi said by phone.

The man entered the Federal Bank of Lebanon branch in the Hamra neighbourhood in west Beirut just before noon on Thursday armed with a firearm, the security source told Reuters.

"He demanded access to around $200,000 he had in his bank account. When the employee refused the request, he began screaming that his relatives were in the hospital. Then he pulled out the gun," the source said.

Some bank customers managed to flee before he shut the doors on the rest, said the source.

At least one elderly man was released from the bank because of his age and government negotiators were deployed to begin talks with the hostage taker, the interior ministry said.

Lebanese media station Al-Jadeed said at least two shots had been fired. The Lebanese Red Cross told Reuters that they had deployed an ambulance to the scene.

A Reuters witness could see a bearded man in a black shirt behind the gated entrance to the bank speaking to several men in plainclothes on the outside.

"Let them give me back my money!" he was heard telling them.

A crowd gathered outside the bank, many of them chanting, "Down with the rule of the banks!"

One man in a striped shirt and baseball cap yelled, "We are depositors and we want our money! We are with him, we're even ready to help him!"

Lebanese banks have limited withdrawals of hard currency for most depositors during the country's three-year financial meltdown, which has left more than three-quarters of the population struggling.

Hassan Mughnieh, the head of Lebanon's Depositors Association, told Reuters that he had been in touch with the hostage-taker and had relayed his demands to the bank's leadership and top Lebanese officials.

"He wants to live, he wants to pay his electricity bill, feed his kids and treat his father in the hospital," said Mughnieh, who was standing with the crowd outside the bank.

Since Lebanon's financial crisis took hold in 2019, many commercial banks have frozen clients out of their hard currency through informal capital controls.

They cap monthly cash withdrawals in U.S. dollars and allow other limited amounts to be withdrawn in Lebanese pounds at a rate much lower than the parallel market rate - resulting in a significant cut in the original value of the deposits.

Banks say they make exceptions for humanitarian cases including hospital care but depositors and their representatives have told Reuters that those exemptions are rarely implemented.

"After three years of neglect, if you want people to take their rights into their own hands, you have to bear the consequences of your actions," said Mughnieh. "He will not hand over his weapon until he gets his deposits."

(Reporting by Issam Abdallah, Laila Bassam and Maya Gebeily; Editing by Mark Heinrich, Mark Porter and Mike Harrison)