Lebanon Approves Financial Gap Law to Distribute Losses and Protect Depositors

The Lebanese government has approved the Financial Gap Law, establishing a formal framework to restructure the banking sector and distribute losses stemming from the 2019 crisis.

The Financial Gap Law is a key requirement of the International Monetary Fund as part of broader financial reforms.

The Financial Gap Law outlines the allocation of losses among the state, the central bank, commercial banks and depositors, prioritizing the protection of small depositors whose balances are below $100,000.

Under the Financial Gap Law, eligible depositors will recover their full savings over four years, while larger depositors will receive $100,000 in cash and the remaining balances through tradable bonds backed by central bank assets.

Accountability and banking reform

The legislation introduces accountability measures for beneficiaries of unjustified transfers and excessive profits before the 2019 collapse, imposing compensation of up to 30%.

It also aims to recapitalize banks and restore their role in financing economic growth.

Lebanon’s financial losses are estimated at around $70 billion, making the Financial Gap Law a critical step to restore confidence and unlock international financial support.