As we know that the draft of the capital control law has been approved and after initial resistance, it is now waiting for remarks from IMF to review the same. As the draft is in Arabic, I have done a short summarisation in English for the benefit of English readers. In case you want to read the entire draft in detail, it is available here in Arabic.
The capital control law draft plan is divided into 13 articles. They are below…
Article One of the capital control law.
The first article gives power to BDL as per the Monetary and Credit Law after the approval of the council on ministers to issue general decision and circulars.
Article Two: deals with the scope of law enforcement.
- The freedom to dispose of funds transferred from abroad after the date of “November 1” without any restrictions.
- Organizing financial withdrawals and money transfers from customer accounts abroad for personal and family use.
- Organizing financial transfers from customer accounts abroad for professional and economic purposes.
Note – Some operations are excluded from the application of the provisions of this law as below
- Foreign diplomatic missions, embassies and international organisations operating in Lebanon.
- The money of the Lebanese state and the Bank of Lebanon.
- International financial institutions.
Article Three: Funds called "New Funds".
Article three is divided into 2 main points
The first is about the incoming transfers from abroad and cash deposits in Lebanese pounds or foreign currency received and will be received by banks operating in Lebanon after November 2019 which will be called the "new money" and which will not be subject to any restrictions and therefore owners will benefit from all banking related services including transfers abroad, cash withdrawals and bank card services in Lebanon and abroad.
The second point further lays down some procedures about due diligence to be carried out for the above purposed. For eg. The Bank needs to create a new special account for the same.
Article 4: Bank transfers abroad
This applies to the source which is not “new money”.There are restrictions and limits provided for the following
1. University and school tuition fees
2. Living abroad
3. Medication and hospitalization
4. Urgent expenses and financial obligations (such as loans and taxes
Of course, all documents and proofs need to be provided. There is an annual remittance ceiling of fifty thousand dollars.
The government will support the financing the import of basic foodstuffs and raw materials for agriculture, industry, the information technology sector, and economic sectors.
Article Five: Freeing internal transactions from restrictions.
Operations in foreign currencies inside Lebanon through transfers, checks or by bank cards are not subject to any controls.
Article Six: Withdrawals in Lebanese pounds.
Cash withdrawals in Lebanese pounds are not subject to any ceilings or restrictions except that the bank must be notified within a specified period.
Banks must pay salaries, pensions, wages and pensions in full and promptly upon the request of the person concerned.
Article Seven: Withdrawals in foreign currencies
Withdrawals in foreign currency at banks operating in Lebanon are determined by periodic circulars issued by the central bank in coordination with the Association of Banks and the bank concerned
Article Eight: Banking Card Services.
The use of bank cards in Lebanese pounds or foreign currency in operations inside Lebanon is subject only to the permissible limits for each card.
The use of bank cards outside Lebanon, including electronic commerce operations with these cards, is within the limits determined by each bank based on the risk policy approved by it, provided that these limits are subject to the principle of fairness in the treatment of all depositors, and it is up to the Bank of Lebanon to determine the general ceilings. For this periodic circulars should be issued.
The ceiling allowed to be used outside Lebanon can be increased by bank cards if these cards are deposited with "new funds".
Article 9: Depositing checks in the account.
Cheques issued in foreign currencies cannot be cashed on bank windows, but rather are deposited into the account.
Article 10: Special provisions related to retail loans.
Banks must accept the payment of instalments or payments due in foreign currency resulting from retail loans, consumer loans and renewable personal credit lines, personal housing loans in Lebanese pounds based on the official exchange rate issued by the Bank of Lebanon, provided that the customer does not have an account in this foreign currency with the bank in question that can be used to pay these instalments or payments.
If the customer has a foreign currency deposit with the creditor bank with the above instalments or payments, this deposit cannot be withdrawn or transferred to another bank before the loan is paid off.
Article Eleven: Penalties
This article states that the violating banks are subject to the penalties as per the applicable law.
Article Twelve: Regulatory Texts and Circulars.
BDL should update and amend all regulatory texts and circulars and the mechanisms for their application and determine their duration of the enforcement of this law.
Article Thirteen: Enforcement and Publication.
This law shall be enforced upon its publication in the official gazette. The council of ministers along with the BDL governor will review decisions on the period of enforcement.