The failure of Lebanese politicians to reform the country’s banking secrecy law perfectly highlights how corruption fuels one of the worst financial crises in the world.

Lebanon’s ongoing economic crisis is one of the worst globally since the mid-19th century, according to the World Bank. Among Lebanese households, nine out of 10 earn less than $400 per month and less than 5% of households reported any kind of financial assistance from the government, according to a survey published in December by Human Rights Watch. The current inflation rate of 171% is at its highest since 1987 — when Lebanon’s disastrous civil war was still occurring.

The banking secrecy law — which plays a role in this crisis — forbids Lebanese banks from sharing details of any bank account such as its balance or owner. Under the law, anyone can “transfer assets and financial deposits to banks anonymously and in an unregulated manner,” explains Lebanese economist Hussein Cheaito. As a result, critics accuse it of enabling financial crimes like fraud and money laundering.

Michel Aoun resigned as president in late October, which has only worsened the crisis. Since then, political division between Lebanese parliamentarians has prevented them from deciding on Aoun’s successor.

Without a president, the interim government has been ineffectual in terms of carrying out any reform, let alone reforming the banking secrecy law.

A briefing from the International Crisis Group warned of these consequences last year.

“Such a vacuum could leave the government’s hands tied, since under Lebanon’s system the president must approve any new cabinet that forms, and the outgoing incumbent has not done so. In a void, caretaker ministers will struggle to make reforms the country needs to obtain rescue from its economic woes.”

In April of last year, Lebanon agreed on the details of a financial aid package with the International Monetary Fund. Before the deal goes through, Lebanon must implement certain reforms to improve the financial sector and reduce political corruption — and a key reform is of the banking secrecy law.

“Modifying the (law) and abolishing secrecy became the primary reform measure demanded of the country as part of the financial recovery plan negotiated with the IMF,” wrote Lebanese economist and journalist Ali Noureddine in November.

Hussein Cheaito argues that reform of the banking secrecy law is “necessary” as it enables “collusion” between the country’s political and banking elites.

An example of this collusion occurred in late February. A Lebanese judge accused Riad Salameh, the head of Lebanon’s central bank, of committing financial crimes including embezzlement and money laundering. Most of Lebanon’s political elite back Salameh, who is being investigated by European prosecutors for similar financial crimes in Europe. But Salameh also heads the central bank’s financial intelligence unit, the only administrative body that had been authorized to acquire certain account details of Lebanese bank accounts under conditions of suspected fraud.

However, one day before his resignation, Aoun signed off on certain amendments to the secrecy law like expanding the number of administrative bodies that can acquire certain details under those conditions. But before Aoun signed off on the law, the Lebanese parliament struck out certain amendments that met IMF demands.

The Association of Banks of Lebanon has since criticized the reform and went on strike at the beginning of February. The strike ended weeks later but resumed in mid-March. The Association “reiterated its earlier demands for banking secrecy regulations to be abolished to let lenders share data with authorities and the judiciary for financial investigations,” Reuters reported.

Meanwhile, the Associated Press reported that hundreds of protesters were dispersed by security forces last week after almost two hours of clashes in Beirut. The protesters mainly consisted of retired soldiers whose pensions have decreased in value due to inflation and who have found it difficult to access bank deposits due to the capital control laws that have been imposed in recent years.

One protester told the Associated Press that before the crisis, his salary was equivalent to $1,000 per month — but it is now only about $50, despite several raises. “I pay more than that for my wife’s treatment (for multiple sclerosis),” he said. “How can we eat, drink and pay our bills?”

The Associated Press reported that other protests — by other Lebanese frustrated with the government’s inability to handle the crisis — also occurred that week in other parts of the country.

Mohamad Radwan Al Omar, the head of the Lebanese Assembly for Inclusive Development, told The Media Line: “These (IMF) reforms will be insufficient if the country does not manage to transition to a legitimate government, rather than a caretaker government.”

In late March, Ernesto Rigo, the IMF’s Mission Chief to Lebanon, announced that “very slow” progress had been made toward the necessary reforms and that he “expected more in terms of implementation and approval of legislation [to address reforms].” In particular, the IMF wants to reform the banking secrecy law “to address outstanding critical weaknesses.”

Other experts on the situation are equally pessimistic.

“To anyone observing Lebanon over the last four years, the likelihood of an IMF program being implemented appears slim to none,” Mike Azar, an international finance professional with expertise on Lebanon’s financial crisis, told Reuters. “There is no urgency, no incentive, and no pressure on decision-makers to implement any of the basic reforms.”

Chadi Nachabe, a Tripoli-based public policy research specialist, told The Media Line that he believes “Lebanese politicians don’t have the will” to carry out the necessary reforms.

So, it does not seem like Lebanon’s political or banking elites will meet the IMF demands any time soon — in particular, abolishing or sufficiently amending the banking secrecy law.

“A lot of people made fortunes out of the crisis,” said Al Omar, referring to the collusion between banking and political elites.

The failure to sufficiently reform the banking secrecy law is just one example of how this collusion is having deadly consequences for Lebanon, in terms of heightening violence and hunger. While there are those like Cheaito who are doubtful about the long-run usefulness of an IMF bailout, it remains true that this particular law — and the latest failure to reform it — is just one example of how corruption is worsening the financial crisis.