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In November 2014, Banque du Liban launched Circular 331, a USD 400 million mechanism presented as the foundation of a regional technology hub, with central bank guarantees covering up to 75% of commercial bank investments in startups, incubators and venture funds. The paper revisits the scheme twelve years on and argues that its design served engineered bank liquidity and a narrow circle of bank-affiliated insiders and fund managers more than it served venture capital.
The analysis traces how the guarantee structure created severe moral hazard: with the central bank absorbing most of the downside and supplying cheap funding, banks with no venture-capital risk frameworks concentrated capital in a narrow band of technology ventures and neglected agriculture, food processing, education and research. A 2015 critique had already noted that banks were receiving seven-year interest-free leverage that could be reinvested in Treasury bills.
The paper then assesses the central bank's September 2026 statement on Article 8 (bis) of Basic Decision No. 6116 and asks whether it marks a serious recovery effort for depositors or another late regulatory gesture. For depositors, lenders and policymakers, it frames Circular 331 as a case study in the governance failures behind the wider banking collapse.
Key findings
- The central bank has acknowledged that deploying more than USD 300 million into private venture capital fell outside its core mandate under the Code of Money and Credit.
- The 2026 measures require full disclosure of the status, market valuation and governance of every investment made with central bank funds.
- Banks must present time-bound exit strategies that return principal to the central bank in US dollars, and restructurings, asset transfers or secondary sales are frozen without prior authorisation.
- Civil and criminal prosecution is threatened against institutions and fund managers suspected of squandering assets or withholding information.
- The paper concludes that a recovery of roughly USD 300 million is minor against depositor losses, and that real recovery requires full transparency, accountability and an end to delayed enforcement.
Summary of the paper; the full analysis is in the PDF.