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Lebanon's interbank rates fall to 4%

Dec 28

The interbank interest rate dropped to 4 percent Tuesday from 15 percent a week ago, Bank Audi has said. One of the reasons for this drop according to Audi was the maturity of the seven-year Treasury bills Monday, which allowed the banks to inject cash into their coffers.

“The overnight rate fell from 15 percent last week to 4 percent after seven-year ... Treasury notes matured on Monday, leaving market players with ample local currency liquidity at hand,” Audi said in its weekly report.

Interbank rates went haywire over the past two weeks due to the shortage of cash among most Lebanese banks, prompting some of them to borrow from lenders at 80 percent to 120 percent.

The Central Bank has refrained from intervening and left it to the commercial banks to borrow freely from each other.

Sources said that the Central Bank does not encourage commercial banks to withdraw the T-bills and Eurobonds before their maturity.

“The pressures caused by the previous crisis have led to an unprecedented rise in interest rates, especially on customer deposits in the lira and dollar markets,” one banker said.

He added that the high interest rates on the lira prompted depositors not to convert from the lira to the dollar.

The banker explained that at one point banks have offered high interest rates on dollar deposits to discourage depositors and investors form taking their money somewhere else.

Bankers said that the Central Bank intends to expand its incentives next year to lure more deposits.

BDL’s incentives are intended to encourage banks to lend and encourage businessmen to invest, expand institutions, increase employment and create new incomes, which in turn will stimulate the economic cycle,” one banker said.

Bankers and investors are also pinning high hopes on the convening of Paris 4 donor conference. Prime Minister Saad Hariri hopes to secure billions of dollars in pledges from the international community to rebuild the country’s infrastructure.

“The possibility of convening such a conference is great opportunity for Lebanon after the meeting of the international community to support Lebanon recently, which constitutes a necessary but mandatory entry into any large-scale funding program from donor countries and international and regional financial institutions for projects inside Lebanon,” one banker said.