04 March 2011
BEIRUT: Societe Generale has won a bid to merge with Lebanese-Canadian Bank, the target of recent accusations by the U.S. Treasury of involvement in money laundering and connection to a terrorist group, Central Bank Governor Riad Salameh said Thursday.
Speaking to LBC TV station, the governor said that Societe Generale made the best offer to acquire the assets and deposits of the bank and assured the public that the bank has a clean balance and is well managed despite the accusations leveled by the U.S. Treasury.
“We had assurance from the French who own a share in SGBL to support the merger of both banks. This reflects the big confidence in the Lebanese banking sector,” Salameh said.
He did not disclose the value of the transaction but sources told The Daily Star that offers ranged between $550 million and $620 million.
The governor also denied that the Central Bank had offered a loan to SGBL to acquire LCB.
Societe Generale, which is affiliated to the French Societe Generale, has pledged to keep on all current employees of LCB.
But Salameh admitted the decision to merge LCB had come at the request of the U.S. Treasury as a way to remove the scandal-hit administration and resume confidence in the bank.
“We discussed many choices to save the bank and the best way was to merge the Lebanese Canadian Bank with another bank because defending the reputation of this bank may take several months and this is not suitable to the management of the Lebanese Canadian Bank,” Salameh said.
An informed source told The Daily Star that the fact Societe Generale is part-owned by the French will give LCB some political protection, at least temporarily, from the U.S. campaign against banks suspected in illegal activity and in connection to terrorist groups.
He added that the French group which owns 19 percent of SGBL have promised to increase their share in the bank, a move that would provide additional coverage and liquidity to LCB.
SGBL is one of Lebanon’s Alpha Group banks, the 12 largest banks in terms of customer deposits (over $2 billion).
Somewhat ironically, Lebanese-Canadian Bank has bigger customer deposits and assets than SGBL.
The Lebanese-Canadian Bank has $5.88 billion in customer deposits up to 2010, an increase of 19 percent compared to 2009.
The bank’s net profits last year reached $60 million, but even more impressively has no bad debts or acid assets.
On Feb. 10 the U.S. Treasury said LCB, through management complicity and a failure of internal controls, was used “extensively” to move as much as $200 million a month in proceeds from illicit drug deals.
Salameh stressed that all deposits in the bank are intact and there is no threat against them, reiterating that the Central Bank’s main concern is to protect the banking sector and depositors.
Fransabank, Banque Libano-Francaise and Byblos Bank also made offers to acquire the Lebanese Canadian Bank.
Asked if the Central Bank will treat Hezbollah as a terrorist organization, as it is viewed by the U.S. administration, Salameh emphasized that Hezbollah is a Lebanese party and “we have to follow the Lebanese law in this regard.”
“They [the U.S.] are free to think whatever they want. We only comply with U.N. Security Council resolutions and we have always abided by these resolutions especially when there was a decision not to deal with Iranian banks,” Salameh said.
He added that the U.S. Treasury has accused certain Lebanese individuals of drug-related money laundering.
“We did not look at the evidence which the U.S. Treasury has concerning this case with the exception of what was mentioned in the press. We are currently conducting an investigation to check if these violations took place,” Salameh said.
He added that the Central Bank intends to strengthen measures to improve banking supervision and ensure that all banks are complying with these directives.
Salameh said that the Central Bank will organize the cash which flows to the country and its banks and most notably the cash which is being carried and deposited by combos and exchange dealers.
“The Lebanese banking sector is in a sound position and there is no threat against these banks,” he argued.
Copyright The Daily Star 2011.
