The remarks came during the regular meeting between the ABL and Salameh. The meeting are designed to promote coordination between Banque du Liban and the ABL on different issues related to the banking sector and the monetary situation.
Over the past few years, many Lebanese banks have engaged in a fierce competition to attract funds and deposits, offering lucrative interest rates to old and new customers.
Some large banks have even offered interest rates as high as 20 percent on dollar deposits on the condition that the amount is not less than $20 million.
But these extraordinary offers targeted a small number of big investors abroad.
Salameh said previously that deposits had dropped by more than $3 billion in the first four months of 2019, but expressed confidence that deposits and remittances would continue to flow into Lebanon.
During the meeting, Salameh indicated that domestic market conditions were acceptable and that concerns about the currency market had receded.
He added that demand for foreign currency in the market was within the normal range, and that BDL’s intervention in the foreign exchange market was limited and related to meeting demand for commercial purposes. He said global interest rates were broadly stable and might even decline, which would be positive for Lebanon.
The governor also said that, in its concluding statement of its Article IV Consultation with Lebanon, the International Monetary Fund stressed the need to implement fiscal and structural reforms that would lead to lower interest rates in the country.
He added that the IMF projected a wider fiscal deficit for this year than the government’s target in the 2019 draft budget.
The governor called on authorities to implement the necessary reforms in order to narrow the deficit and support investor confidence in the Lebanese market.
Salameh called on the Lebanese banks to communicate more frequently with international ratings agencies, especially about Lebanon’s sovereign ratings.
He said rating agencies would take into account any positive developments in Lebanon’s public finances and the implementation of reforms, such as those planned for the electricity sector.
The governor asked banks to be more flexible with clients facing difficulties in repaying their debts.
Salameh noted that the deterioration in the asset quality of commercial banks had been limited, with the banking sector’s nonperforming loans net of provisions ratio reaching 5 percent, compared to an annual average ratio of 3.75 percent over the past few years.
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