After six years of financial collapse, depositors wait as lawmakers and banks navigate a fragile path toward recovery.
Lebanon’s financial collapse was neither sudden nor accidental. Long before the October 2019 protests and the Eurobond default, the country’s financial system was already structurally broken. By the late 2010s, Banque du Liban and much of the banking sector were effectively insolvent, sustained not by recovery plans but by financial maneuvers that postponed losses and concealed the scale of the damage. The cost of this delay was not shared evenly: it was pushed onto depositors, wage earners, and public institutions, while those who designed and benefited from the system largely insulated themselves from its consequences.
As the crisis deepened, a familiar pattern took hold. Political and banking elites—often overlapping in ownership and interest—closed ranks, preserving their influence as capital quietly left the country and accountability remained absent. Depositors, meanwhile, were locked out of their savings through informal controls, punitive withdrawal rates, and a collapsing currency that erased purchasing power. Over time, this material transfer of losses was accompanied by a narrative shift, one that reframed the collapse as a state failure alone and blurred responsibility for decades of financial mismanagement.
Now, with Lebanon still without a comprehensive recovery plan six years into the crisis, the spotlight has turned to the draft financial gap law—legislation intended to quantify and allocate the losses of the collapse. International institutions and civil society advocates say the gap law could be better than doing nothing at all: a necessary, if imperfect, step toward transparency and economic stabilization. But experts caution that in its current form the proposal remains opaque, incomplete, and potentially dangerous, especially for ordinary depositors. Key safeguards are missing, and critical questions about who bears the cost—and how—have yet to be answered.
At the heart of this moment is a choice that echoes Lebanon’s past: whether to favor expediency or insist on accountability and protection for those who have already borne the greatest cost. For now, the outcome remains uncertain, but it appears to be drifting toward the same pattern of impunity that has long shaped Lebanon’s political and economic life, and continues to do so.
What is The Gap Law?
The financial gap law is legislation intended to address the shortfall between what Lebanese banks owe depositors and what the financial system can realistically repay following the collapse that began in 2019. This “gap,” estimated at more than $70 billion, reflects accumulated losses at commercial banks and the central bank after years of unsustainable financial practices.
The law’s function is not to recover lost funds or revive the economy, but to legally recognize these losses and determine how they are distributed among the state, Banque du Liban, commercial banks, and depositors. It is designed to provide a legal framework for restructuring the banking sector and to meet key conditions set by international lenders, including the International Monetary Fund.
Under draft versions of the law, depositors would be treated according to the size of their accounts. Deposits below $100,000 are slated for gradual repayment in cash over several years, though no clear source of funding is identified. Deposits above that threshold would not be repaid in full, but instead converted into long-term financial instruments issued by the central bank, with maturities extending up to two decades and relatively low interest rates.
The law does not introduce new liquidity into the financial system, nor does it guarantee full repayment of deposits. Instead, it formalizes how losses are absorbed in a system that no longer has sufficient assets to meet its obligations. While proponents argue this approach brings legal clarity after years of uncertainty, critics say the framework remains incomplete, particularly when it comes to protecting depositors and defining the state’s financial responsibility.
Better Than Nothing, But Far From Just
For Ziad Abdel Samad, economic expert and executive director of the Arab NGO Network for Development (ANND), the very fact that Lebanon is finally debating how to return depositors’ money—six years into the collapse—is significant.
“It’s a good thing that, after all this time, there is at least a serious discussion about depositors’ funds,” Abdel Samad told NOW. “But that does not mean the solution is fair or complete.”
Abdel Samad frames the gap law as a product of deep structural paralysis. With no comprehensive financial or economic reform, no administrative overhaul, and no meaningful political or judicial accountability, he argues that the draft law may be “the best that can be reached under current circumstances”—but only with substantial improvements.
At its core, Abdel Samad says, the law does not prevent losses; it formalizes them.
“Depositors will lose money—there is no escaping that,” he explained. Lebanon’s cumulative losses were once estimated at around $130 billion. That figure has since fallen to roughly $80 billion, not because the system recovered, but because losses were already imposed informally. Currency devaluation, forced withdrawals, severe haircuts, and the sale of checks at fractions of their value—sometimes as low as 14 or 20 percent—have already wiped out large portions of people’s savings.
“These are real losses that depositors absorbed over the past six years,” Abdel Samad said, pointing out that many families were forced to accept them to pay for medical care, education, or basic living costs—losses the law does not acknowledge or compensate.
For depositors with more than $100,000, the picture is bleak. Only the first $100,000 would be repaid over four years; the remainder would be converted into long-term bonds, repayable over 10, 15, or even 20 years.
“People who saved a lifetime—$500,000, $1 million—from their own labor will inevitably face losses,” Abdel Samad said.
Beyond depositors, Abdel Samad highlighted how the crisis redistributed wealth unevenly. Some borrowers, particularly large corporations and politically connected investors, repaid massive loans at the old exchange rate and emerged largely unscathed—or even enriched.
“These are the biggest beneficiaries,” he said, adding that they require a separate solution that the law currently avoids.
The fate of long-term bonds is another major concern. Abdel Samad drew a parallel with the post-war Solidere experience, when property owners were compensated with shares that quickly lost more than half their value.
“I fear the same thing could happen here,” the expert said. “Once these bonds enter the market, their value could collapse, especially if depositors are forced to sell them to meet urgent needs.”
Much of the law, Abdel Samad argued, is built on assumptions rather than guarantees—chief among them the idea that Lebanon’s economy will recover enough to fund repayments years down the line. “This is a promise built on another promise,” he said. “Who can say the economy will recover to that extent?”
For Abdel Samad, the law’s deepest flaw is what it omits: a full forensic audit of commercial banks and the central bank. “Without knowing where the money went, who benefited, and how losses were generated, no distribution of losses can ever be fair,” he says. Accountability, he insists, is not optional. “Without auditing, investigation, and prosecution, this becomes a financial Taif Agreement—turning the page without justice.”
Formalizing Losses, Not Restoring Deposits
For Walid Marrouch, professor of economics and associate dean at the Lebanese American University, the gap law did little more than codify losses that depositors had already absorbed.
“The losses were already realized years ago” he told NOW. “No law is going to mask this reality.” According to Marrouch, Lebanese households had been living in a cash economy for six years, grappling with inflation and shrinking purchasing power, and the law merely formalized that hardship rather than reversing it.
Marrouch stressed that all depositors were vulnerable. Even those with accounts under $100,000 would receive repayments over four years, but “in real terms, they will get less than $100,000 measured in today’s dollars,” he noted. Large depositors, he added, faced an even grimmer outlook. “These deposits don’t exist at the moment—they were more than three times the size of GDP. Any law, including this one, will have to be creative in offering a fraction of their deposits over the long term.”
He also highlighted the law’s silence on preventing future mismanagement. The law may be addressing past losses, but it says nothing about preventing banks from treating depositors unfairly in the future, Marrouch explained. He added that confidence in the current banking sector was critically low, fueling calls for credible new or foreign banks to replace what he called “zombie” institutions.
While recognizing the shared responsibility for Lebanon’s financial collapse—including the government, the central bank, commercial banks, and depositors themselves—Marrouch emphasized the disproportionate burden borne by ordinary depositors.
“It’s time to move on and restore financial intermediation, whether via restructured or entirely new banks, or the risk is simply more of the same for years to come,” he said.
Ultimately, the gap law marks a critical moment, but one fraught with uncertainty. Marrouch framed it as a formal acknowledgment of losses that had long existed, emphasizing that the real challenge lies in rebuilding the financial system and holding those responsible for past decisions to account. Abdel Samad added that the law is far from final. As it moves through parliament and various committees, it will face pressures from powerful banking lobbies, making its ultimate form and effectiveness unclear.
Part of that uncertainty stems from the strong influence of the banking lobby. Parliamentary amendments have placed key positions on the Higher Banking Commission in the hands of figures closely tied to banks and large businesses. The first chamber, responsible for imposing sanctions, now includes the president of the National Institute for the Guarantee of Deposits (NIGD), largely controlled by commercial banks. The second chamber, which decides whether a bank should be restructured or liquidated, includes an economic expert chosen from a list prepared by “Economic Instances,” a body representing major Lebanese businesses, along with the NIGD president and a representative of bank shareholders. At the same time, the Central Bank governor and his vice-governors retain broad powers over both chambers, echoing the concentration of authority that critics say contributed to the financial collapse.
Experts see the law as a potential entry point rather than a solution, stressing that its success will hinge on rigorous financial auditing and an independent judiciary. Without those safeguards, ordinary depositors remain exposed.
