The 2025 Lebanese bank reformation is a much-needed overhaul of the country's banking system, aiming to restore confidence and fairness for all stakeholders.
A key aspect of this reformation is the creation of a new regulatory framework, which will provide a clear and transparent set of rules for banks to operate within.
This will help to prevent the kind of corruption and mismanagement that led to the current crisis, where many Lebanese citizens have seen their savings frozen or stolen.
The new framework will also establish a robust system of oversight and accountability, ensuring that banks are held responsible for their actions and that depositors' rights are protected.
By doing so, the reformation aims to rebuild trust in the banking system and encourage economic growth and stability in Lebanon.
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Lebanese Banking Reforms
After two decades of banking secrecy, Lebanon has finally started to lift the veil on its financial institutions. The new Bank Secrecy Law, enacted in April 2025, grants the Central Bank and the Banking Control Commission access to banking data, including for audit firms appointed by the Central Bank.
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The law applies retroactively for up to 10 years, covering all banking operations since 2015, enabling regulators to revisit pre-crisis transactions and reclaim illegally obtained profits made by banks' shareholders at the expense of depositors.
Lifting bank secrecy has been a long time coming, with calls from reformists intensifying over the years to open the door to meaningful financial recovery. The IMF has consistently demanded lifting banking secrecy as a prerequisite for reaching a bailout deal for Lebanon since 2020.
The new law introduces significant provisions to facilitate the fair restructuring of the banking sector, including auditing the banks' balance sheets and assessing their ability to continue operating. This process is expected to include investigating potential violations by bank management.
Most importantly, the law's main mandate of lifting banking secrecy extends to routine oversight, even after restructuring is complete. The law clearly allows the Central Bank and the Banking Control Commission to access client names, account balances, and any banking records.
The law's passage was facilitated by international pressure, particularly from the United States, and the composition of Prime Minister Nawaf Salam's government, which included prominent reformist figures.
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A one-year multisectoral action plan has been proposed to support the government's reform program, prioritizing restoring macro-financial stability, rebuilding citizens' trust, and laying the foundation for a new, successful economic development model.
The World Bank's Lebanon Economic Monitor (LEM) has revised the real GDP contraction for 2024 downward to 7.1%, bringing the cumulative decline since 2019 to nearly 40%.
Banking Secrecy
Lebanon's banking secrecy law was enacted in 1956 and provided a reassuring financial environment for those who preferred to keep their wealth undisclosed. This law prohibited the disclosure of customer names and transactions to any individual or public authority.
The law was particularly attractive to wealthy segments in Arab countries like Syria, Egypt, and Iraq who sought to transfer their capital to safer environments, away from oversight or political risk. Beirut's developed financial market and freedom of capital movement also contributed to the banking sector's prosperity.
However, over the past two decades, banking secrecy lost its edge due to domestic and international developments. Lebanon joined the Global Account Tax Compliance Act agreement in 2016, which required it to report accounts held by foreign residents in Lebanese banks to their countries of residence.
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The UAE developed its own financial system into a tax haven, attracting capital from other Gulf nations and eroding Lebanon's share of the regional market. Despite five years of external and popular pressure, no meaningful reform was achieved until the passage of the new Bank Secrecy Law in April 2025.
The new law introduces significant provisions to facilitate the fair restructuring of the banking sector. Lifting bank secrecy granted the Central Bank and the Banking Control Commission access to banking data, including for audit firms appointed by the Central Bank.
The law applies retroactively for up to 10 years, covering all banking operations since 2015. This enables regulators to revisit pre-crisis transactions and reclaim illegally obtained profits made by banks' shareholders at the expense of the depositors.
Most importantly, the law's main mandate of lifting banking secrecy is not limited to the bank restructuring process; it extends to routine oversight, even after restructuring is complete. The law clearly allows the Central Bank and the Banking Control Commission to access client names, account balances, and any banking records.
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What Comes Next?
To move forward with the reformation, the Central Bank and the Banking Control Commission must use the law effectively by auditing banks' assets and liabilities.
The next step is to audit transactions from the last 10 years to identify the causes of losses and establish fair accountability.
This means losses should be borne by those responsible, particularly those who profited unlawfully at the expense of depositors.
The policies adopted by the banking sector since 2019 have placed the heaviest burden on depositors by withholding deposits or repaying them at significant discounts.
The Central Bank and the Banking Control Commission must confront political pressures from actors who will not welcome these measures, including the banking lobby, which holds significant influence over political life.
The Banking Control Commission must start auditing banks' balance sheets to assess the financial condition of each individual bank and form a clear picture of the portion of deposits the banking sector can currently guarantee.
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The passage of the Financial Stability Law, or Financial Gap Law, is a decisive step toward restoring trust, delivering justice to depositors, and halting Lebanon's ongoing collapse.
The law will define how to address the existing loss gap and determine the level of deposit protection, making it a critical step in the reformation process.
The Bank Restructuring Law, which overhauls the Higher Banking Council and specifies the powers of the Banking Control Commission, must be passed by Parliament to continue the reform process.
The law will also define criteria for identifying viable banks for recapitalization versus those to be merged or liquidated, providing a clear direction for the sector's recovery.
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