Lebanon’s banking reforms give the appearance of progress but ultimately serve to delay accountability, protect elites, and avoid meaningful financial restructuring.

At first glance, Lebanon’s latest legislative activity—especially in banking reform—suggests a government attempting to right its wrongs. A revised Bank Resolution Law has been passed, and efforts to codify financial repair are underway. On paper, it all looks like progress. But beneath the surface lies a more familiar Lebanese story: a political class willing to legislate endlessly while resisting accountability, justice, and real reform.

In recent years, Lebanon’s executive and legislative branches have displayed a certain kind of productivity: drafting laws, launching reform campaigns, tinkering with institutional architecture. But the real measure of governance is not bureaucratic output. It is intent—and impact. And here, Lebanon falls short.

Take the Bank Resolution Law. Though it establishes a two-tiered Higher Banking Commission and outlines procedures for bank valuation, resolution, and liquidation, the law is riddled with the same problems that have long plagued Lebanese governance. Conflicts of interest remain embedded in the system, with banking sector representatives participating in oversight mechanisms. The law fails to supersede outdated statutes, preserving a legal patchwork that paralyzes enforcement. Judicial review is vaguely defined, opening the door to procedural bottlenecks and legal stalling.

It is, in essence, a document that mimics international standards while leaving its core purpose hollow.

The real test of any government is its ability to protect the vulnerable and restore public trust. On this front, Lebanon’s institutions have failed. The revised law links depositor compensation to a still-pending “Gap Law”—kicking the can down the road and postponing relief for those most affected. Small depositors, retirees, and wage earners remain unprotected, while large depositors are left facing an undefined recovery process. The absence of clear enforcement tools—such as credible asset quality reviews, transparent bail-in procedures, and loss recognition—underscores a system designed to obscure, not resolve.

Worse still, there’s no forward-facing vision. No roadmap for repairing the system. No plan for restoring the essential trust that once bound Lebanon’s financial system to its people.

What’s at stake isn’t just a technical fix. It’s a social contract. Compensation for depositors is not a policy option—it’s a moral imperative. And yet, the legal architecture artfully dodges this responsibility, instead offering only vague timelines and discretionary measures. The state skirts direct responsibility, offering no restitution guarantees. In its place: ambiguity that caters to political expediency rather than national recovery.

A credible recovery plan would do three things. First, it would acknowledge the financial damage and fairly distribute the burden across all stakeholders—the state, the banks, and shareholders. Second, it would end the opacity surrounding asset valuations and legal claims. And third, it would enact enforceable protections for small depositors, prioritizing those least able to absorb financial shocks.

This isn’t simply a financial matter—it’s existential. Rebuilding trust in the financial system begins with telling the truth.

Lebanon’s banks no longer perform the most basic functions of financial intermediation. They don’t lend. They don’t fuel investment. They don’t support households or small businesses. Instead, they hold frozen deposits, burdened by toxic assets and paralyzed by risk. Interest rates are punitive. Credit lines are all but extinct. The revised law offers no credible strategy to change that.

Small and medium-sized businesses—already reeling from inflation, power outages, and a collapsing market—remain cut off from capital. Restructuring banks to resume lending must be a top priority. That means separating viable operations from failed assets. It means using monetary tools to spur productive lending. Without clean balance sheets and fresh liquidity, the economy will remain stuck in a low-trust, cash-based, informal mode that benefits the elite few and excludes the struggling many.

But the most urgent need is for truth—financial, political, institutional. The entire banking sector rests on illusions: overstated book values, unrecognized losses, and deliberately avoided audits. Asset quality reviews—if they exist at all—are neither independent nor credible. This deliberate obfuscation perpetuates insolvency under the guise of solvency. It staves off collapse, but at the cost of any real recovery.

True reconstruction demands clean slates. That requires internationally credible asset reviews, the writing off of unrecoverable exposures—whether sovereign debt, central bank placements, or non-performing loans—and losses to be borne first by shareholders, not the public.

Yet this is the opposite of what’s occurring. Lebanon’s political and banking elites continue to hide losses, delay reckoning, and prolong the crisis. A real “clean slate” can’t be cosmetic; it must be institutional. That means empowering an independent, legally robust resolution authority with the tools to restructure, merge, or liquidate banks based on actual viability—not political connections.

Only then can Lebanon’s banking sector become what it should be: a steward of deposits, a driver of investment, and a cornerstone of economic renewal.

Reform begins with truth—not technicalities. And truth remains absent from Lebanon’s post-crisis legal architecture.

Despite the intricate structure of the new Bank Resolution Law, it fails to confront the deeper rot: a crisis of trust and a systemic breakdown in regulation. It is not a reform law. It is a performative document crafted to appease international observers while avoiding domestic confrontation.

Lebanon doesn’t suffer from a shortage of laws. It suffers from a surplus of bad faith. Its legislature and executive can produce legislation, but not justice. Not reform. Not protection for its citizens.

In this context, productivity is an illusion. A genuinely reformist government would codify truth into law: recognizing losses, protecting small depositors, and empowering oversight. It would collapse conflicting mandates into coherent governance. It would replace opacity with accountability and inertia with action.

But Lebanon’s laws remain tools of delay. They are shaped not to solve crises but to outlast them. And until that changes—until there is political courage, societal reckoning, and a national will to begin again—legislative productivity will remain a hollow statistic in a state of unending dysfunction.