أسواق رأس المال والتصنيفات
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Breaking the bank-centric hegemony
Why Lebanon’s recovery depends on debt capital markets and systemic financial reform
Behind the parliamentary debate over the Bank Resolution and Financial Gap laws lies a strategy of delay that protects bank shareholders at depositors’ expense. The paper sets out the inverted pyramid of loss allocation, contrasts it with the IMF hierarchy of claims, and proposes a blueprint for rebuilding Lebanon’s financial system around independent intermediaries, domestic credit rating agencies and a liquid debt capital market.
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The Capital Markets Authority: a failure so far
Role, recent history and services to SMEs
This issue assesses the Capital Markets Authority amid the planned suspension of its operations in January 2024. It highlights governance flaws: the central bank governor chairs both the authority and the banking control commission, the board is politicised, and the sanctions committee and capital markets tribunal were never established. Citing the Optimum brokerage case, it argues an effective authority is essential for SME funding, disclosure and investor protection.
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Corporate bonds in the Lebanese market
A restructuring pillar
This issue presents a domestic corporate bond market as a pillar of financial restructuring. Although bond legislation dates from 1933, post-war issuance was dominated by banks; only seven banks issued Eurobonds and only two cement companies, Holcim and Sibline, issued corporate bonds. The report blames bank concentration, overdraft dependence at effective rates of 21% in 2019 and government crowding-out, and recommends independent intermediaries and rating agencies.
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The sovereign rating ceiling
Lebanon’s selective default and a customised rating methodology
This issue examines the limits of bank ratings in a sovereign Selective Default environment. It argues that insolvency has rendered standard methodologies meaningless, that international agencies were slow to downgrade, and that concentration-driven systemic risk was never captured. Noting banks' non-compliance with capital requirements and the 3% correspondent liquidity reserve, the report proposes a customised methodology weighting qualitative factors at 60%, stronger transparency, and compulsory ratings in any restructured sector.
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What ratings are
Definition, importance and the rating process
This issue argues that regulated domestic corporate ratings are long overdue in Lebanon. Regulators never licensed local providers, and international agencies were costly and uninterested in family-owned firms. The report links this gap to SMEs being implicitly capped at the sovereign's Selective Default rating, information asymmetry, de-risking, the absence of a bond market and blanket bank collateral requirements, outlines corporate rating methodology, and calls for regulated local agencies.
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Capital markets and the CMA
This issue argues that equity investment in Lebanon remains viable despite the crisis. It describes the Capital Markets Authority's mandate and the shallowness of the Beirut Stock Exchange, with only ten listed stocks. The report contends that depositors turning into investors, devaluation favouring export sectors and the Electronic Trading Platform's suitability for small IPOs together create conditions for domestic listings, and presents OFS transaction advisory as preparation for equity funding.
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The crowding-out effect
The Beirut Stock Exchange, SME financial inclusion and a national scoring scale
This issue traces the crowding-out of Lebanese SMEs by decades of bank lending to the state. In 2019 banks held US$190 billion in deposits, of which US$130 billion was owed by government against US$40 billion in private loans. Contrasting today's ten listed securities with the Beirut Stock Exchange's earlier depth, it argues the Electronic Trading Platform can open equity and corporate debt to family-owned SMEs while imposing governance.
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