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The January 2024 issue examined the Capital Markets Authority (CMA), established under Law 161 of August 2011, at a time when its operations faced suspension, initially set for 10 January 2024 and then postponed. The authors argued that the CMA's weakness stemmed from its governance: the central bank governor also chaired both the CMA and the Banking Control Commission, a concentration of power that conflicted with capital market development, compounded by politicised appointments and board vacancies.
The issue linked the CMA's difficulties to the wider crisis: parliament's failure to pass a capital control law requested by the IMF, resistance to reform from political and banking interests, and investigations into financial misconduct that the CMA's own control unit had helped uncover. Without effective oversight, it argued, investor confidence, listings and access to long-term finance would continue to suffer.
The second half set out the CMA's potential role for SMEs: regulating an Electronic Trading Platform, facilitating SME bond and equity issuance, supporting alternative finance and financial literacy, and licensing local rating agencies and scales to reduce information asymmetry between investors and borrowers.
Key findings
- The CMA was created in 2011, some 15 years after the Beirut Stock Exchange was relaunched in 1996, a lag the authors said allowed banks to dominate the financial system.
- Key enforcement bodies, the sanctions committee and capital markets tribunal, had not been fully established at the time of writing.
- Financial-sector losses had surpassed $70 billion, with the banking sector equal to nearly 400% of GDP and heavily exposed to state debt.
- The Beirut Stock Exchange suffered from low liquidity and trading volumes owing to the absence of institutional and foreign investors.
- The authors recommended that the CMA regulate the establishment of local rating agencies as a prerequisite for a domestic debt capital market.
Archive: written in Jan 2024; figures and assessments reflect conditions at the time of writing.Summary of the paper; the full analysis is in the PDF.