80 Billion Dollars Lost in Lebanon... Central Bank Governor Reveals Shocking Truth

The Economic, Social and Environmental Council held a meeting with Central Bank Governor Karim Said, attended by deputies: Farid Al-Bustani, Nicolas Al-Sahnawi, Tony Frangieh, Faisal Al-Sayegh, Amin Shari, Michel Al-Douaihy, Waddah Sadiq, Elias Hankash and Razi Al-Hajj, and Council Director Dr. Muhammad Saif Al-Din, and President of the Beirut Traders Association Nicolas Chammas, and President of the Maronite League Engineer Maroun Al-Helo, and President of "IDAL" Dr. Majid Mneimneh, and Vice President of the Capital Markets Authority Dr. Mahmoud Jabbai. Arabid spoke about "the importance of the upcoming amendments to the draft law on financial regularization and deposit recovery," stressing "the necessity of protecting depositors' rights and approving mechanisms for their recovery, and reactivating lending to the private sector as an entry point to stimulate growth and investment, and the gradual transition from a paper currency economy to an economy based on digital payments."

Said

For his part, the Governor of the Central Bank of Lebanon said: "Six years have passed since the financial-banking collapse became undeniable, six years of paralysis, obstruction, and wars, and of daily pressures coming from every direction: from the state, from Parliament, from banks, and from the International Monetary Fund. And above all, from the legitimate demands of depositors who entrusted this system with the savings of their lifetimes."

He presented "a systematic presentation addressing the diagnosis of the crisis, proposed solutions, the required legislative framework, and a realistic timeline, in addition to the basic facts from which any treatment cannot succeed without starting," and said: "The financial-banking crisis in Lebanon is, technically, a systemic crisis in every sense of the word, and it has been described as such by many experts locally and internationally. It was also finally acknowledged by the International Monetary Fund."

He pointed out that "the issue is not about the failure of one bank, or even a number of banks, but about a simultaneous collapse of the state's financial capacity, the financial position of the Central Bank of Lebanon, the liquidity of the banking sector, and citizens' confidence, so that all these elements began to feed each other leading to a comprehensive collapse," and said: "The basic facts in this context cannot tolerate any embellishment: about $80 billion in losses in the banking sector, most of which were deposited by banks with the Central Bank of Lebanon, the state's default on Eurobond payments in March 2020, in parallel with the collapse in the value of Lebanese pound treasury bills which were worth double the value of Eurobonds, the collapse of the national currency exchange rate by more than 98%, and the emergence of parallel markets operating outside legal frameworks, six years of paralysis without a restructuring law, a recovery plan, or a clear reform path, the 2024 war which added more destruction to what already existed, and then the ongoing war today in 2026."

He asked: "How did we end up here?" and said: "The financial model adopted by Lebanon after the civil war was based on a continuous chain of unsustainable refinancing operations. The fixed exchange rate and high interest rates attracted deposits from Lebanese at home and abroad, in addition to regional deposits. These funds were then recycled through banks to the Central Bank of Lebanon, and through the Central Bank to the state which was suffering from a recurring fiscal deficit. This model was sustainable only as long as inflows exceeded outflows, but with the shaking of confidence in 2019, the collapse came quickly and comprehensively."

He added: "Failures increased the severity and complexity of the crisis. Successive governments dealt with the public treasury without responsibility or accountability. The regulatory environment allowed resorting to financial engineering while systemic risks were accumulating, and there was an absence of independent auditing and effective oversight, while corruption was not a marginal phenomenon, but was at the core of the system itself."

He continued: "Since its first day in office on April 4, 2025, the new management of the Central Bank of Lebanon declared that this crisis is a systemic crisis, and the goal was not to exempt any party from its responsibilities. We clearly affirmed that the state, the Central Bank of Lebanon, and commercial banks bear responsibility for the financial-banking crisis, and that they must all bear the burdens of addressing it. We insisted on this description, based on the necessity of technical accuracy, because diagnosis determines treatment. Each party read into this position what suited them, and that did not concern us. We do not take positions to please any party, but to determine the facts as we see them. Popular competitions are the business of politicians, not technocrats like central bank officials. Our tasks, from the doorkeeper to the governor, are not affected by a decision, an article, a public or private stance, a threat, or an inducement. The only supervisor of the Central Bank of Lebanon is the judiciary."

He considered that "the official recognition of the systemic nature of this crisis, whether by the Central Bank of Lebanon or the International Monetary Fund, does not absolve anyone of responsibility. The state, the Central Bank of Lebanon, and commercial banks all bear varying shares of responsibility, each according to its role and contribution to the emergence of the crisis," and said: "What the systemic framework of this crisis allows is providing a fair basis for burden-sharing, ensuring that the cost of treatment does not fall entirely on depositors, who are at the same time the least responsible party for the crisis and the most affected by its consequences. This is not just a financial principle, but a moral duty and the foundation of social justice, and it is the position that the Central Bank of Lebanon has committed to, publicly and consistently, since day one."

He added: "International experiences are rich with precedents and examples worthy of study. Each crisis has its own causes, its responsible parties, and the lessons to be drawn from it. The Lebanese crisis differs fundamentally from all those crises, and this fact is extremely important when determining responsibilities and developing solutions. In most cases, the private sector was the one that sparked the crisis. In Lebanon, however, the public sector was the starting point."

He continued: "In Cyprus, for example (2012-2013), the economy was excessively and recklessly exposed to Greek sovereign debt. When Greek debt was restructured, Cyprus entered a severe crisis. This was followed by the application of the Bail-in mechanism, which sparked much controversy, but it was painful and decisive, and the crisis was resolved within three years."

He pointed out that "radical and rapid treatment leads to faster recovery than gradual and prolonged depletion," and said: "In Iceland (2008), banks whose size reached about ten times the national economy collapsed under the weight of speculative international lending. The Icelandic authorities' reaction was remarkable. They left the failing banks to face their fate, protected local depositors, and referred officials to the judiciary. It ended with 26 bankers being imprisoned."

He explained that "recovery came faster than in all countries that chose costly bailout programs," considering that "accountability is not an option, but a fundamental pillar in any reform process," and said: "As for Greece (2010-2018), it lived a full decade of austerity as a result of undisciplined fiscal policies, whose repercussions were hidden behind accounting practices that would have impressed the most skilled illusionists. Reform was constantly promised, but it was also constantly postponed."

He mentioned that "political dysfunction not only delays recovery, but itself turns into a crisis," asking: "Where does Lebanon fall within this classification of crises?" and said: "In truth, it does not fall under any of them. In all the cases we reviewed, the original sin was committed by the commercial banking sector, while the state, despite the shortcomings in its practices, ultimately played the role of rescuer. In Lebanon, however, the state, due to fiscal recklessness and fierce, systematic borrowing, was the main player in this national tragedy, while all other beneficiaries and participants became either primary agents like the Central Bank of Lebanon or actual partners like commercial banks."

He explained that "the Lebanese crisis was not born in the cradle of the private sector, but was a crisis started by the public sector, engineered over decades to finance a chronic and structural fiscal deficit, through a mechanism demonstrating a great deal of disregard for risk," and said: "The state borrowed from the Central Bank of Lebanon in Lebanese pounds and US dollars at interest rates that no state should have paid. The Central Bank of Lebanon offered commercial banks exceptional returns for employing their funds with it, and the banks accepted, driven by the pursuit of excessive profit. As for the regulatory and supervisory authority, i.e., the Central Bank of Lebanon, it did not perform its responsible role and its prudential tasks, but rather played the role of a financial intermediary, facilitating dealings between a state lacking fiscal discipline and a banking sector ready to benefit from this reality, while systemic risks were accumulating until they reached catastrophic levels."

He added: "The warning indicators were there. They were issued by independent economists and by credit rating agencies. But those warnings did not come from the Central Bank of Lebanon, nor from the Ministry of Finance, nor from the Ministry of Economy, nor from the Association of Banks, and they fell on deaf ears, because a large number of parties were making significant financial gains. As for the depositors, including teachers, engineers, professionals, military and civilian retirees, in addition to diaspora families sending their money home, they were not partners in this operation, especially small and medium depositors. They were the fuel that kept it going. When the engine exploded, they were asked to bear the consequences of the wreckage."

He pointed out that "this disparity in responsibility constitutes the moral and legal basis for the Central Bank of Lebanon's position on the principle of burden-sharing," and said: "The state bears primary responsibility. The Central Bank of Lebanon bears responsibility almost equal to and competing with that of the state, due to its failure to perform its role as a regulatory and supervisory body over the banking sector, and as the state's bank committed to the requirements of financial prudence. Commercial banks, which benefited from this situation and made gains from it, also bear responsibility from which they cannot evade under the pretext of claiming they were forced due to limited investment opportunities abroad or were merely a financial tool or a neutral intermediary between depositors and the central bank or the state. As for depositors, they bear no direct responsibility; they are victims of this collapse."

He added: "Recovery requires working on five simultaneous tracks, not sequentially but in parallel:

1 - Clear identification of losses: Conducting a comprehensive audit of the Central Bank of Lebanon's accounts and publishing its full results, in parallel with independent and internationally accredited assessments of all commercial banks. No plan can gain credibility without this fundamental pillar. The size of the financial deficit must first be accurately determined before distributing responsibilities and burdens.

2 - Restructuring the banking sector: Classifying all banks into three categories: banks capable of recapitalization, banks needing restructuring, and banks requiring orderly resolution or liquidation. This task must be undertaken by an independent body for addressing bank conditions, with clear legal powers, immune from political interference, and operating according to specific and binding deadlines.

3 - Restoring depositors' rights – the non-negotiable pillar: Providing maximum possible liquidity protection with priority for small and medium depositors, and adopting mechanisms to recover part of the rights of large depositors through a mix of cash payments, ABS financial instruments, and capital contributions where appropriate (Bail-in), within clear timelines. The Central Bank of Lebanon will not support any plan that places the main burden of losses on depositors who did not cause them.

To fulfill its obligations within the framework of deposit repayment, the Central Bank of Lebanon will work to liquidate and sell all assets it has the authority to dispose of, including its stakes and shares in operating companies without exception, and most of its real estate portfolio accumulated over the years, in addition to its portfolio of securities, including Eurobonds. These efforts also include all debts owed to the Central Bank of Lebanon by the state, recorded in its books and subject to audit and verification. This will be done in a way that ensures the provision of the maximum possible resources and capabilities, enabling the Central Bank of Lebanon to bear its share of financial responsibility in addressing this crisis and contributing to finding a fair and sustainable solution to it.

4 - Restructuring sovereign debt: The default that occurred in 2020 must be addressed through a negotiated settlement based on the principle of equal treatment and public debt sustainability. This constitutes an essential condition for restoring confidence that allows Lebanon to return to financial markets. Sovereign debt includes Eurobonds and Lebanese pound treasury bills.

5 - Fiscal reform: No banking treatment can succeed or continue under a state that does not finance itself properly and sustainably. This includes reforming public institutions, enhancing revenue management, rationalizing the public sector wage bill, and abolishing politically motivated forms of subsidies."

He pointed out that "the Central Bank of Lebanon cannot print financial stability; rather, the responsibility for achieving it lies with the state through good management and good governance," and said: "In this context, the current government, may it be thanked, and the Parliament have carried out the following reforms: Amendments to the banking secrecy law were approved in 2025. The bank restructuring law was approved and is currently undergoing additional review at the request of the International Monetary Fund, and will be re-approved in its final form during 2026. The government also referred the draft Financial Regularization and Deposit Recovery (FSDR) law to Parliament, a project that will witness long and heated debate, but I expect its approval at the end of 2026 or the beginning of 2027."

He added: "I will not offer the comfortable illusion of rapid recovery. What I will present is a realistic vision, with the emphasis that each stage in it remains conditional on the achievement of what precedes it, and that every delay is a choice whose price is ultimately paid by depositors. The first phase, the stabilization phase, should extend over 2026 and 2027. It includes completing forensic and financial audits, approving the basic legislative framework, launching the bank classification process, reaching a program with the International Monetary Fund, and beginning to return part of the rights of small depositors. These are not just ambitious goals; they represent the minimum required to prove seriousness."

He continued: "During the period between 2027 and 2028, the restructuring process must actually begin: classifying banks and addressing their conditions, settling sovereign debt, achieving tangible progress in public financial indicators, and gradually lifting capital controls as confidence returns. This will be the most difficult phase, due to its technical complexities, political sensitivities, and its need for sustained political will that Lebanon has not yet sufficiently demonstrated, but it must find it. Between 2028 and 2030, if the previous phases succeed, transitioning to normalcy becomes possible. Then the credit function can be restored, access to markets regained, the scope of restoring depositors' rights expanded, and a sustainable monetary framework established. Then Lebanon returns to the world, not as a cautionary tale, but as a state that finally decided to govern itself. None of that is inevitable, but all of it is achievable. The distance between these two realities is called political will and sound management of public funds, by the state and the Central Bank of Lebanon."

He added: "No honest narrative of this crisis can ignore the parallel economy, including its illicit flows, money laundering operations, and corrupt practices that contributed to penetrating and weakening the Lebanese financial system. Lebanon's presence on the grey list of the Financial Action Task Force (FATF) is not just a reputational issue. It restricts correspondent banking relationships, raises the cost of financial transactions, and sends a message to the world that Lebanon remains unable to establish itself as a reliable and transparent financial channel."

He said: "Since April 2025, the Central Bank of Lebanon has taken a wide range of measures, including relying on specialized companies in combating the 'black economy' such as K2 Integrity, developing advanced tools for monitoring financial operations, enhancing Know Your Customer (KYC) requirements and enhanced due diligence procedures, applying transparency requirements related to the ultimate beneficial owner, tangibly improving the quality of suspicious transaction reports, and enhancing cooperation with the Financial Action Task Force (FATF), the Middle East and North Africa Financial Action Task Force (MENAFATF), and the Egmont Group."

He noted that "the parallel economy in Lebanon is not a marginal phenomenon," and said: "Every dollar traded outside the official system does not contribute to public revenues or financial stability, but rather increases the fragility of the economic and financial system. In this context, the Central Bank of Lebanon, in close coordination with the Ministries of Finance and Justice, launched a forensic audit process undertaken by the company Alvarez & Marsal, which – contrary to rumors spread by some skeptics, and beyond what the law issued in 2024 requires – has a much broader scope of work than merely reviewing the funds paid by the Central Bank of Lebanon at the request of previous governments to finance the subsidy program. This audit will cover every penny paid by the Central Bank of Lebanon or facilitated through it during the period from October 2019 to the end of 2023. This includes, but is not limited to, the subsidy program, as well as funds transferred to banks via international transfers, and funds paid on behalf of the state. This process is the second phase of the original audit mission entrusted to Alvarez & Marsal, the first phase of which was assigned to the Ministry of Finance, during which the Central Bank of Lebanon provided all required data and information, according to what the company officially confirmed."

He added: "This audit, let it be known to all and taken into consideration, comes within the framework of the firm and non-negotiable commitment of the Central Bank of Lebanon to the principles of disclosure, transparency, and accountability. Getting Lebanon off the grey list is a fundamental priority, because Lebanon cannot play a reliable role in the global financial system unless it achieves this goal."

He continued: "If terrorist financing poses a serious threat, corruption funds are no less dangerous; they may be larger in size and more widespread. More dangerously, corruption enjoys latent social acceptance in Lebanon. We socialize, befriend, are invited to events, and share in the joys and sorrows of people who were at the core of the corruption system, whether we realize it or not, and often we realize it and deny it to ourselves before others. We deal with corruption either with rational apathy or fleeting disgust, but without rising to the level of decisive rejection that turns it into a unifying national cause. At the Central Bank of Lebanon, we consider this battle among our priorities, and we will fight it to the end."

He added: "We are talking about funds systematically extracted from the Central Bank of Lebanon, from public institutions, and from government contracts, over many decades, then transferred abroad or hidden within complex and closed financial structures."

He saw that "the matter is not about limited or transient corruption, but about a major theft targeting the Lebanese people, their central bank, and their depositors," and said: "The funds that left Lebanon in the months surrounding the events of October 2019 amounted to billions of dollars. Some of it was legitimate in the absence of Capital Control, and much of it was not. Some was transferred by investors, privileged depositors, or bankers, and some, unfortunately, by officials in the state and the Central Bank of Lebanon."

He pointed out that "the Central Bank of Lebanon cooperates fully with the Lebanese judicial authorities, and places at their disposal all information and financial analyses permitted by law in support of any judicial prosecutions," and said: "We also cooperate with foreign judicial authorities in Switzerland, France, Germany, Liechtenstein, Luxembourg, the United Kingdom, and other countries where judicial proceedings related to illegally transferred Lebanese funds are taking place."

He noted that "any funds recovered through these procedures return to the depositors," and said: "They are not a resource for the state that can be redirected or disposed of."

He concluded: "The crisis we are living through today was not the result of a passing circumstance, and exiting it will not be the result of one measure, one year, or a few years. It requires serious effort, broad accountability, and radical reform. When these elements are available, recovery becomes possible, and restoring depositors' rights and rebuilding the state and the financial sector become achievable goals. The path is clear, the choices are difficult but known, and what we lack is not knowledge, but will."