Understanding the Banking Regulatory Framework in Lebanon

Explore banking regulatory framework in Lebanon, key laws, supervisory bodies, and recent reforms relevant for businesses and investors.

By Sudhanshu Singh

Lebanon’s banking regulatory environment has undergone major changes in recent years in an effort to restore stability and build investor confidence in a sector long impacted by financial mismanagement, political instability, and sovereign default.

The revised legal structure aims to reinforce supervisory mechanisms, ensure monetary integrity, align with global anti-money laundering (AML) and financial transparency norms, and prepare the country for prospective financial support from institutions like the International Monetary Fund (IMF).

For international investors and global financial entities, understanding this framework is essential before engaging with Lebanon’s financial market.

Legislative foundations and evolving regulatory philosophy

Lebanon’s banking sector is primarily governed by the Code of Money and Credit (CMC) of 1963, which established the Banque du Liban (BDL) as the central bank and set foundational rules for banking activities. Complementing the CMC are older foundational texts, including the Code of Obligations and Contracts (1932) and the Code of Commerce (1942), which handle contractual and corporate aspects of banking operations. Other major legislative pillars include Law No. 318 (2001) and Law No. 44 (2015) for AML regulation, and the Banking Secrecy Law of 1956, which was notably amended in 2022 and again in 2025.

These laws operate alongside BDL-issued circulars, as well as regulations from the Banking Control Commission (BCC), the Capital Markets Authority (CMA), and the Ministry of Finance. Basic Circulars 144 (2017) on cybersecurity and 147 (2019) on business registration illustrate the growing complexity of compliance for financial actors.

Lebanon’s legal framework reflects a growing emphasis on international alignment, notably through the adoption of Basel III standards, AML and counter-financing of terrorism (CFT) measures, and fiscal transparency rules aligned with OECD recommendations. The revised Banking Secrecy Law, which passed after two failed attempts, now allows public authorities and auditors access to bank records from the last ten years—addressing one of the IMF’s core reform demands.

Supervisory bodies and institutional roles

The BDL plays a central role in defining monetary and credit policy, issuing banking licenses, and supervising financial activity. Its Central Council includes representatives from both the Ministry of Finance and Ministry of Economy. The BCC operates as an independent entity monitoring banks’ compliance and financial health. The Special Investigation Commission (SIC), under the BDL umbrella, investigates suspicious financial activity and can lift banking secrecy when necessary. The Higher Banking Instance (HBI) acts as a judicial authority to impose sanctions.

The CMA, established under Law No. 161 (2011), regulates financial instruments and capital markets, including crowdfunding and trading. The Association of Lebanese Banks (ALB) is a professional entity that represents banking interests, arbitrates industry disputes, and ensures operational coordination among member banks.

Defining and licensing banking operations

Under Article 121 of the CMC, banks are defined by their primary function: deploying public funds in credit operations. This broad classification encompasses commercial banks, investment banks (specialized banks), financial institutions, foreign bank branches, and representative offices. Fintech firms offering regulated services, such as digital payments or crowdfunding, must obtain licenses from either the BDL or CMA. Lebanon has not issued a comprehensive fintech law, but existing regulations, such as Circular 69/2000 on electronic transactions and the 2018 Electronic Transactions and Personal Data Law, govern digital banking activities.

The capital requirements to establish banking institutions vary: LBP 10 billion (US$112,084) for commercial banks, LBP 30 billion (US$336,255) for investment banks, and specific Tier 1 capital thresholds for fiduciary operations, LBP 10 billion (US$112,084) for banks and LBP 7.5 billion (US$84,063.7) for financial institutions. Commercial banks cannot participate in industrial or commercial entities, while financial institutions are prohibited from accepting current deposits. Investment banks handle medium and long-term finance, asset management, and securities brokerage, but are restricted from receiving deposits with terms under six months.

Banking secrecy law and transparency measures

Lebanon had made amendments to the Banking Secrecy Law in 2025 in April 2025 as a pivotal part of banking reform. For the first time, authorized government entities and independent auditors can access banking records up to a decade old. Passed with 87 votes in parliament, the law aims to enhance accountability, fight corruption, and accelerate restructuring talks with the IMF. This marked a break from Lebanon’s historic reliance on absolute financial confidentiality to attract deposits and signaled a shift towards international norms.

Deposit insurance and state-linked financial support

Bank deposits in Lebanon are insured up to LBP 75 million (US$840.6) through the National Institute for the Guarantee of Deposits (NIGD), funded by both the Lebanese government and local banks. All banks are obligated to contribute to the NIGD annually. The state also holds a 20 percent stake in the Housing Bank, which was established to provide real estate loans to Lebanese citizens. This public-private mix in insurance and sector support illustrates the government’s continued, but limited, direct financial role in the banking sector.

Institutional conduct, affiliate control, and compliance

Regulations concerning affiliate transactions are guided by the CMC and the Code of Commerce, with specific circulars governing intra-group relationships. For instance, Circular 34 defines levels of control, exclusive, joint, and participative, based on voting rights and board representation. Circular 110 outlines disclosure and reporting requirements for overseas affiliates in which a Lebanese parent holds a controlling or significant interest.

Islamic banking institutions, operating under Law No. 575 (2004), are subject to distinct principles including the prohibition of interest (riba) and the application of Shariah-compliant financial structures like mudarabah and ijara. While governed by general banking laws, these banks must also adhere to Islamic legal standards, with oversight often provided by an internal Shariah board.

Challenges and investor considerations

The Lebanese banking sector remains under immense pressure due to the country’s sovereign debt default in 2020, longstanding governance issues, and macroeconomic uncertainty. Many depositors continue to face limited access to their funds. Regulatory challenges include reconciling new transparency demands with traditional practices like banking secrecy, implementing global AML standards, and rebuilding investor trust in a constrained fiscal environment.

International businesses considering market entry should assess Lebanon’s commitment to regulatory reform, ongoing engagement with international bodies like the IMF, and the legal treatment of capital, taxation, and fund repatriation.

Takeaway

Lebanon’s banking regulatory regime has entered a critical transitional phase. Legal amendments, particularly to banking secrecy and AML laws, signal a shift toward international compliance and transparency. Although regulatory infrastructure, anchored by the BDL, BCC, CMA, and SIC, has strengthened, structural financial weaknesses and political volatility continue to pose challenges. For global investors, clarity on licensing, sector-specific regulation, and the evolving legal environment will be key to evaluating opportunities and managing risks in Lebanon’s financial market.

(US$1 = LBP 89,218)

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