Lebanon: S&P Maintain Stable Outlook On Lebanese Banks

Standard &Poor's in its recent report has maintained its stable outlook on Lebanese banks. S&P's report also cautioned against the high level of Lebanon's public and the continued fragile political climate. S&P said that these two factors could affect the growth of Lebanese banks, and are also acting as severe constraints on the performance of the domestic banking sector. The report further cited economic risk and fragile operating environment as main drivers of the ratings on Lebanese banks. S&P finds that Lebanese banks have limited business opportunity in the domestic market and hence several banks have expanded their business outside the country.

The report also appreciated the resilience of the domestic banking sector. S&P said following Prime Minister Rafik Hariri's assassination last February, the Lebanese economy virtually stagnated for almost four months. Despite pressures, the banking system showed strong resilience. With support from Banque du Liban and the Banking Control Commission, Lebanon's banking sector managed to avoid a crisis situation of the financial system becoming illiquid and again revived confidence. While foreign exchange reserves dwindled considerably, during this period, the Lebanese pound was not devalued. S&P said that given the recent momentum, the banking system's resilience to shocks and the new political situation the rating outlook on Lebanese banks is stable which is in line with the sovereign rating.