Lebanon’s banking resolution law must shift from redundant diagnostics to decisive action by using existing regulatory assessments to restore trust and economic stability.

Lebanon doesn’t need another financial resolution law to uncover the truth. It needs one that finally acts on what’s already known.

For years, critics have decried the paralysis of Lebanon’s banking regulators. The Banque du Liban (BDL), the Banking Control Commission (BCCL), and political elites have been accused of indifference, incompetence—or worse, complicity. But what if, this time, we flipped the narrative?

What if we assume that the regulators did their job?

Imagine that BDL’s Circular 154 wasn’t a symbolic gesture but a genuine policy directive with tangible compliance metrics. Issued in August 2020, it marked the boldest effort yet to repatriate funds, restore liquidity, and reestablish trust. It aimed to separate the viable from the terminally hollow.

Suppose the CAMELS rating system—used globally to assess capital adequacy, asset quality, management soundness, earnings, liquidity, and market sensitivity—was quietly applied in Lebanon, even if the results remained unpublished. And what if IFRS 9, the gold standard for recognizing expected credit losses, was at least partially enforced? Then the real issue isn’t diagnosis. It’s delivery.

When BDL issued Circular 154, it wasn’t just another memo—it was a lifeline. Banks were ordered to shore up their capital and repatriate offshore deposits. The BCCL was meant to evaluate compliance, document violations, and take follow-up action. If it did, that information already exists.

Similarly, CAMELS provides a comprehensive view of institutional health. While the public never saw the scores, regulatory insiders likely did. And with IFRS 9 on the books, Lebanese banks were required to anticipate—not merely report—credit losses. The tools are there. The problem is they’ve gathered dust instead of momentum.

Enter a new bank restructuring law. On paper, it’s impressive—Article 10 mandates independent asset evaluations. Article 11 lays out procedures for acknowledgment and objections. Article 13 introduces complex tools—write-downs, mergers, bail-ins. Article 14 enshrines the principle of fairness and proportionality.

But here’s the catch: the law doesn’t lack structure. It lacks conviction.

Rather than starting from scratch, the law should formalize and disclose what has already been done. If CAMELS ratings exist, publish them. If Circular 154 was enforced, share the results. If IFRS 9 audits were conducted, make them public.

Article 10’s call for “independent assessments” could build upon evaluations that have already been conducted. Why duplicate work that, if credible, needs validation? Even Article 11’s ten-day objection window presumes that previous evaluations carry substance. Why pretend otherwise?

Likewise, Article 13 offers real-world tools—bail-ins, asset transfers, and liquidation. These aren’t theoretical anymore. They’re overdue. And Article 14’s call for proportional loss allocation assumes the data behind it has already been gathered.

Yet Article 8, which mandates public disclosure of evaluation summaries in the Official Gazette and on the BDL website, remains largely unfulfilled. Lebanon doesn’t need better laws—it needs to use the ones it already has.

Confidence in the financial system doesn’t erode overnight. It dies slowly—choked by silence, secrecy, and paralysis. Lebanon’s collapse followed that pattern. Its recovery threatens to repeat it.

Fixing that starts with clarity. The resolution framework should classify banks into three transparent categories: viable (Category A), conditionally recoverable (Category B), and unrecoverable (Category C), based on existing regulatory diagnostics.

Category A banks—fundamentally sound—should resume operations with minimal intervention. Category B may require time-bound liquidity support or consolidation. Only Category C institutions—irretrievably insolvent—justify state intervention.

This logic aligns with post-crisis economic principles championed by economists such as Richard Musgrave and reaffirmed by the International Monetary Fund, which holds that governments intervene only where markets fail. But to act responsibly, the state must first communicate clearly. Every depositor deserves to know their bank’s status—directly, in plain language.

This begins with establishing an oversight body to ensure the integrity of assessments and allowing appeals based on transparent evidence.

Justice isn’t just legal. It’s moral. The resolution must prioritize protecting small and medium depositors first—those who bore the brunt of the collapse without fault.

Shareholders and major creditors must absorb the initial losses. Related-party self-dealing during restructurings must be barred. And where appropriate, the judiciary must distinguish between honest regulatory error and negligent oversight.

Because if Circular 154, IFRS 9, and CAMELS were available and ignored, the public wasn’t just kept in the dark—it was deceived.

This isn’t just about saving banks; it’s about restoring the rule of law—and trust in the idea that Lebanon’s institutions can still serve the public interest.

The bottom line: use what’s already there. Lebanon doesn’t need more assessments. It needs decisions.

If regulators have already done their jobs, the real question becomes: why hasn’t anyone acted on their work?

The bank restructuring law should not restart the diagnostic process. It should operationalize it. Only then can it evolve from legal draftsmanship into economic justice and institutional redemption.

Lebanon doesn’t need another reform. It needs resolve.