Lebanon’s banks struggle with Syria and sanctions

By:
Nathan Collins
Published on:

The country’s banks have benefited from several years of unprecedented calm. But as the fighting threatens to spill over the border, is it time to batten down the hatches again?

Lebanese banks have not always made the right choices when looking to expand internationally. Two of the most favoured countries for expansion were Syria and Egypt. The mood towards these countries at the moment is very much one of damage control.

"The Arab Spring definitely created problems," says Freddie Baz, chief financial officer of Bank Audi. "Last year in March we instructed our managers to stop development and taking on customers."

Syria, in particular, is an albatross around the neck of the Lebanese banking sector and the Lebanese economy in general.

The Institute of International Finance projects that the Syrian economy will shrink by 14% this year. Foreign direct investment is projected to fall to just $100 million; it stood at $1.5 billion in 2010. The conflict in Syria has been bad news and bad business for the Lebanese banks that operate there – including the country’s three largest: Bank...