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Parliamentary debate over Lebanon's Bank Resolution Law and Financial Gap Law is often presented as a technical dispute over monetary mechanics. This August 2026 conceptual paper argues that it is a loss-shifting exercise: by prolonging deliberations, the political-financial establishment allows bank liabilities to be eroded through "“Lollarization”", dilutes the hierarchy of claims and protects shareholder equity. The result is an "inverted pyramid" in which shareholders are protected and losses settle on state assets and depositors, the reverse of standard international resolution practice.
The paper traces the distortion to the post-civil-war period, when banks found it more profitable to fund government deficits than private enterprise, crowding out corporate credit and leaving equity and corporate bond markets undeveloped despite a legal framework for corporate bonds dating back to 1933.
Its central proposal is a diversified financial system in which a debt capital market operates alongside a rightsized, recapitalised banking sector. That requires investment banking separated from deposit-taking, accredited local rating and scoring agencies, and a broad investor base. For investors, lenders and policymakers, the paper sets out the investor map and the infrastructure needed to channel idle capital into productive companies.
Key findings
- By 2017, sovereign debt and central bank placements made up 66.6% of consolidated bank assets, while private-sector loans made up 29.4%, mostly consumer and retail debt.
- Between 1990 and 2019 only seven banks issued Eurobonds, and only two non-bank industrial corporations, Holcim and Sibline, issued corporate debt.
- Amendments to the Bank Resolution Law (Law 23/2025) are said to have placed figures tied to bank and central bank interests on the Higher Banking Commission, giving them a veto over which banks are liquidated.
- Between USD 8 bn and USD 10 bn in fresh dollars is estimated to sit idle in the cash economy, with insurers, fresh-dollar depositors, family offices, the diaspora and development finance institutions as potential bond investors.
- Relaunching the Capital Markets Authority's electronic trading platform with low-cost rules for SME issues, typically below USD 1.5 million, is presented as essential to a market estimated at over USD 1 bn a year.
Summary of the paper; the full analysis is in the PDF.