Berri Backs Capital Control but Not a 'Haircut'

Parliament Speaker Nabih Berri is in favor of banks imposing capital control on depositors but he does not support a haircut, a media report said.

“Speaker Nabih Berri supports capital controls that would preserve the money of depositors through allowing withdrawals in the form of installments,” sources told Kuwait’s al-Anbaa newspaper in remarks published Sunday.

But he is against “a haircut which would deduct from deposits or turn them into long-term bonds,” the sources added.

Major banks in Lebanon began tightening banking controls in early February, halving the amount of dollars depositors are allowed to withdraw every month, despite growing public anger.

Faced with a dollar liquidity crunch, banks have imposed informal controls on dollar withdrawals and transfers abroad since September amid widespread anti-government protests and Lebanon's worst economic crisis in decades.

Withdrawal limits differ from bank to bank, but have so far generally been capped at around $600 a month, while most transfers abroad have been halted.

The informal controls have sparked public outrage in protest-hit Lebanon, where an anti-government street movement launched on October 17 has grown increasingly angry at banking policies.

"These new illegal measures by banks come with the political blessing of the new government," said activist Lucien Bourjeily.

Experts and demonstrators say banking controls amount to a de facto "haircut" on savings because they are forcing dollar depositors to deal in the nosediving Lebanese pound.

The currency has plunged against the greenback on the parallel exchange market, though the official peg of 1,507 pounds to the dollar in place since 1997 remains unchanged.

Central bank chief Riad Salameh said in January that he agreed with money exchange houses to cap the parallel rate at 2,000 -- but exchanges continued to charge rates edging towards 2,500.

Salameh also asked for special powers to authorize the banks to set withdrawal limits, which had not formally been backed by the government. The finance ministry, however, has yet to publicly respond to his request.