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Voluntary ‘Bail-in’ condition regulated by the Central Bank

Sep 01

Voluntary ‘Bail-in’ condition regulated by the Central Bank

Listing on stock exchange mandatory introduction of perpetual bonds

The Central Bank has directed banks to comply – even if in a gradual manner – with all banking laws and procedures, especially those pertaining to liquidity and solvency.

Banks should “resume their normal activities and client services at a level equivalent to or at least that provided prior to October 2019,” read a circular of the central Bank.

The circular said that banks should take necessary legal and procedural measures to allow voluntary conversion of depositors’ money into equity in the bank, or into ‘Redeemable, Tradable, and Convertible Perpetual Bonds’. The bonds can be interest bearing, with rates exceeding BDL mandated caps.

Bank shares as well as these perpetual bonds can be traded, and transferred abroad, if they were originally purchased in ‘fresh funds’.

These types of bonds can be classified as equity class.

Banks should have all their shares listed exclusively on the Beirut Stock Exchange. A bank’s management should be separated from its board of directors.