Banque du Liban: The Role and History of Lebanon's Central Bank
The Banque du Liban (BdL), known in English as the Bank of Lebanon, serves as the central monetary authority of the Lebanese Republic. Established to ensure financial stability and regulate the nation's economy, the BdL manages the issuance of the national currency and oversees a banking sector that is vital to the country's economic framework.
Operating from its headquarters in Beirut, the BdL is a legal public entity with financial and administrative autonomy, meaning it is not subject to the standard management rules applied to the general public sector. While its primary focus is monetary policy, the bank holds unique global distinctions, including significant ownership in national infrastructure and entertainment.
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Key Facts
- Established: August 1, 1963 (Fully operational April 1, 1964).
- Ownership: 100% state-owned.
- Current Governor: Karim A. Souaid (as of March 2025).
- Currency: Lebanese pound (LBP).
- Reserves: $14.7 billion.
- Unique Holdings: Owns 99.37% of Middle East Airlines and is the dominant shareholder of the Intra Investment Company, which owns 53% of Casino du Liban.
Historical Background
The evolution of Lebanon's monetary system is deeply tied to its geopolitical history. Following the end of Ottoman domination on October 6, 1918, the Turkish Treasury's paper money was phased out. To stabilize the economy, British authorities initially introduced banknotes from the National Bank of Egypt, which were linked to sterling.
When French authority took over in 1919 under General Gouraud, the use of Egyptian currency became impractical. By Decree N° 129 on March 13, 1920, the French government established a national currency for Syria and Lebanon. The Banque de Syrie et Liban was granted the concession to issue this currency, which became legal tender on May 1, 1920, with a fixed exchange rate of 20 French francs to 1 Syrian-Lebanese pound.
Role and Functions
The Banque du Liban was formally established by the Code of Money and Credit on August 1, 1963. Its primary responsibilities include:
- Currency Issuance: Managing the production and distribution of the Lebanese Pound.
- Monetary Stability: Implementing policies to maintain the value and stability of the currency.
- Banking Regulation: Overseeing more than 100 banks to ensure the soundness of the financial sector.
- Money Transfer Regulation: Controlling the flow of funds into and out of the country.
The Higher Banking Commission
Established in 1967, this commission provides critical oversight. It is chaired by the Governor of the BdL and includes a vice-governor, the Director General of the Ministry of Finance, a representative from the Association of Banks in Lebanon, and the chairman of the National Deposit Guarantee Institution (NDGI).
Governance and Leadership
The bank is managed by a Governor, supported by four vice-governors and the Central Council. By long-standing convention, the Governor is always a Maronite Christian.
| Metric/Role | Detail |
|---|---|
| Current Governor | Karim A. Souaid |
| Bank Rate | 2.75% |
| Interest on Reserves | 4.00% |
| State Ownership | 100% |
| Total Reserves | $14.7 Billion |
Notable Governors
The bank has been led by several key figures, including Philippe Takla and Elias Sarkis (who later became the 6th President of Lebanon). Riad Salamé served the longest tenure, from 1993 to 2023. The current governor, Karim A. Souaid, took office on March 27, 2025, bringing expertise in private equity and banking governance.
Investment in Innovation: Circular No. 331
On August 22, 2013, the BdL introduced Circular No. 331 to foster Lebanon's knowledge economy. This policy encourages commercial banks to invest in startups by guaranteeing up to 75% of the investment value. To prevent over-concentration, a bank's total participation in startups cannot exceed 3% of its capital, and no single startup can receive more than 10% of that allocated 3%.
Beneficiaries of this ecosystem include Berytech (a tech business development center), Kashida (a 3D Arabic design firm), and the Egnyt Technology incubator. Additionally, the UK Lebanon Tech Hub was established as a joint initiative between the BdL and the UK government.
Controversies and Misconduct Allegations
The tenure of former governor Riad Salameh was marked by significant controversy. He has been accused of money laundering, corruption, and illicit enrichment. A forensic audit covering 2015–2020 revealed $111 million in "illegitimate commissions" and criticized the bank's use of financial engineering—a practice used to attract dollar deposits by offering rates higher than international markets, which the audit claims disguised losses of $76 billion.
As a result, the United States, United Kingdom, and Canada imposed sanctions on Salameh and his associates in August 2023. Furthermore, on July 14, 2025, the BdL issued a circular prohibiting all licensed financial institutions from dealing with Al-Qard Al-Hassan, the financial arm of Hezbollah, following international pressure and sanctions.
Frequently Asked Questions
What is the primary role of the Banque du Liban?
The primary role of the Banque du Liban is to act as the central bank of Lebanon, responsible for issuing the Lebanese Pound, maintaining monetary stability, and regulating the country's banking sector.
What is Circular No. 331?
Circular No. 331 is an investment policy launched in 2013 to support the startup ecosystem and knowledge economy in Lebanon by providing guarantees to commercial banks that invest in innovative companies.
Who is the current Governor of the Bank of Lebanon?
As of March 27, 2025, the Governor is Karim A. Souaid, a financial expert and banking governance specialist.
Why is the Banque du Liban unique compared to other central banks?
The BdL is unique because it holds significant ownership in non-banking entities, most notably owning the majority of Middle East Airlines and having a controlling interest in Casino du Liban via the Intra Investment Company.
What was the "financial engineering" controversy?
Financial engineering refers to a strategy used by the BdL starting in 2015 to attract foreign dollar deposits by offering high interest rates to local banks. A forensic audit later alleged this practice was used to disguise $76 billion in losses.