In April 2025, the Lebanese Parliament passed a law allowing the lifting of banking secrecy, marking a historic shift for the country’s financial system and ending a legacy dating back to 1956. The measure is part of the financial reforms Lebanon is undertaking in coordination with the International Monetary Fund (IMF).
The new law introduces significant provisions to facilitate the fair restructuring of the banking sector, including auditing the banks’ balance sheets and assessing their ability to continue operating. Lifting banking secrecy will now enable the Central Bank and the Banking Control Commission to access banking data. This allows oversight bodies to rely on specialised auditors, selected by the Central Bank, to evaluate each bank individually and investigate potential violations by bank management.
The law applies retroactively for up to 10 years, covering all banking operations since 2015. This enables regulators such as the Central Bank and the Banking Control Commission to revisit pre-crisis transactions and reclaim illegally obtained profits made by banks’ shareholders at the expense of depositors.
“Most importantly, the law’s primary mandate of lifting banking secrecy is not limited to the bank restructuring process; it extends to routine oversight, even after restructuring is complete. The law clearly allows the Central Bank and the Banking Control Commission to access client names, account balances, and any banking records,” said Ali Noureddeen, the Senior Inclusive Economies Associate at TIMEP (Tahrir Institute for Middle East Policy).
What is the Secrecy Law about?
In 1956, as the banking system was formed under President Camille Chamoun’s watch, Lebanon enacted the “Banking Secrecy Law,” which explicitly stipulated the confidentiality of information related to customer names and transactions, prohibiting its disclosure to any individual or public authority (even tax or judicial bodies).
This restriction was also applied to foreign authorities. Even the Central Bank’s oversight authority, the Banking Control Commission, lacked the power to access data related to clients’ accounts. This was despite the commission being legally mandated to audit banks’ operations and ensure compliance with the law.
The law was passed during an era of wealth accumulation from oil extraction in the Gulf region. Back then, regional investors sought stable banking systems, especially since Gulf countries had not yet developed the financial systems they have today. Lebanon’s banking secrecy model provided a reassuring financial environment, especially for those who preferred to keep their wealth undisclosed.
When neighbouring countries like Syria, Egypt, and Iraq experienced waves of nationalisation in the 1950s and 1960s, Lebanon’s banking secrecy served as an attractive shield. Wealthy segments in these countries sought to transfer their capital to safer environments, away from oversight or political risk. Likewise, Lebanese expatriates saw banking secrecy in Lebanon as a way to hide their savings from tax authorities in their host countries.
Banking secrecy became one of the key drivers of the sector’s prosperity before the onset of the civil war in 1975, aided by the freedom of capital movement afforded by Beirut’s developed financial market. During this period, the number of Lebanese banks grew from nine in 1945 to 85 in 1960, and deposits multiplied nearly 38-fold between 1950 and 1975.
However, over the past two decades, several domestic and international developments rendered banking secrecy ineffective in attracting foreign capital, gradually eroding the competitive advantage it once provided. In contrast, the drawbacks of this model became more pronounced, particularly in obstructing efforts to combat banking violations, illicit operations, and money laundering activities.
In 2016, Lebanon joined the “Global Account Tax Compliance Act” agreement, which required it to report accounts held by foreign residents in Lebanese banks to their countries of residence. During the 2021–22 period, Lebanese banks began complying with the American Foreign Account Tax Compliance Act (FATCA) law, which obligates them to disclose any accounts held by American citizens to US tax authorities. As such, banking secrecy no longer made Lebanon a tax haven for wealthy foreign residents.
Meanwhile, Gulf financial markets had developed substantially over the past decades, and Beirut lost the monopoly on liberal and advanced financial systems in the Middle East. The UAE, for instance, developed its own financial system into a tax haven, attracting capital from other Gulf nations and eroding Lebanon’s share of the regional market.
Still, banking secrecy continued to cast a long shadow over Lebanon’s ability to regulate and oversee financial activities. It also hindered tax audit procedures that required authorities to access banking data to cross-check it with tax declarations, making such verification impossible. This was one of the main reasons behind Lebanon’s failure in building a system of tax control and audit to curb tax evasion, estimated at nearly 50% of due taxes. The IMF valued this loss to the Lebanese state at around $4–5 billion annually.
The new law introduces significant provisions to facilitate the fair restructuring of the banking sector. This process is expected to include auditing the banks’ balance sheets and assessing their ability to continue operating. Also, lifting banking secrecy granted the Central Bank and the Banking Control Commission access to banking data, including for audit firms appointed by the Central Bank. This enables oversight bodies to rely on specialised auditors, picked by the Central Bank, to evaluate each bank individually and investigate potential violations by bank management.
An unhappy banking lobby
Even though the new law is quite accommodating, the banks in Lebanon are opposing it and using the media to disparage the legislation. They refuse to take any accountability for the problem. Ever since the formation of Nawaf Salam’s government in February 2025, coordinated defamatory campaigns have targeted independent media outlets, economists, local advocacy groups, and even political figures calling for financial and political reforms.
“The country’s banking lobby, along with the media outlets it funds, has intensified its media campaign as the new government places banking and financial reform among its top priorities. These reforms include resuming negotiations with the International Monetary Fund over a bailout deal, drafting a financial recovery plan, restructuring banks, passing a law that lifts banking secrecy, and filling key public posts, most notably appointing a new Central Bank governor. As conspiracy theories were being spread to discredit reformists and distract the public, the banking lobby has mobilised to block financial and economic reforms unfavourable to its interests. It is in this vein that the lobby’s candidate, Karim Souaid, was appointed on March 27 to lead the Central Bank without much public scrutiny of his agenda,” Noureddeen noted.
“The coordinated media campaign was consistent in its messaging across numerous online media platforms and television programmes, funded by Lebanese businessman and banker Antoun Sehnaoui, a major shareholder and chairman of Societe Generale de Banque au Liban. Sehnaoui is one of the most influential Lebanese bankers and controls various media outlets that reflect his views and defend his interests. He also wields significant influence within a wide range of political parties, MPs, and decision-makers, thanks to his active support and financing of various electoral campaigns and political activities,” he added.
The banks have blamed Kulluna Irada, a pressure group and civil society organisation that has advocated for financial reforms. They assert that the group disseminated false information that caused a bank run and prevented the banks from paying back depositors. The group has been maligned by the media, which has strong ties to the banking industry.
They also spread a conspiracy theory that claimed Kulluna Irada was funded by American billionaire George Soros and the “Global Left.” In fact, independent media platforms Megaphone and Daraj, whose reporting since the beginning of the financial crisis contributed to exposing the violations committed by political and banking elites at the expense of depositors and public funds, weren’t spared either.
Souaid, an asset manager with deep ties to Lebanon’s political and financial establishments, was portrayed as the figure capable of confronting the very conspiracy allegedly orchestrated by Daraj, Megaphone, and Kulluna Irada. Souaid’s nomination and his eventual appointment were met with objections from a wide range of reform advocates, such as the Depositors Union (a collective representing the rights of Lebanese depositors) and other public policy organisations, along with cabinet members and MPs.
The reason behind the banking lobby fiercely backing Souaid lies in the fact that he previously presented a plan to address the crisis by converting the deposits that banks are unable to pay into debts owed by the Lebanese state. The responsibility to repay these deposits would therefore be transferred from the banks to the government. The plan then suggested implementing a “haircut,” or a write-off, of up to 90% of the government’s debts, which would mean that the depositors’ rights would simply disappear. This way, banks would be able to rid themselves of their crisis at the expense of depositors and taxpayers.
The smear campaign from the banking lobby successfully diverted attention away from this problematic plan, which ended up receiving minimal scrutiny in the media. Souaid’s appointment came despite objections from Prime Minister Nawaf Salam himself and a group of ministers. He managed to garner enough votes in the Council of Ministers, benefiting from the support of the President’s top economic advisor, Varouj Nerguizian, who served alongside Souaid on the Board of Directors of Emirates Lebanon Bank. This gave Souaid a big advantage over other candidates, given the President’s influence over the Council of Ministers’ decisions.
What comes now?
The immediate challenge for the Central Bank and the Banking Control Commission is to use the law effectively by auditing the banks’ assets and liabilities and assessing their financial positions. Initiating a comprehensive audit process in the banking sector requires a high degree of determination on the part of the Central Bank, apart from the ability to confront political pressures from actors (including the banking lobby) who will not welcome these measures.
“The next step is to audit transactions from the last 10 years, to identify the causes of losses and establish fair accountability. This means that losses should be borne by those responsible, particularly those who profited unlawfully at the expense of depositors. This stands in contrast to the policies adopted by the banking sector since 2019, which have placed the heaviest burden on depositors by withholding deposits or repaying them at significant discounts. To continue the reform process, Parliament must now pass the Bank Restructuring Law, already adopted by the government as a draft bill. This law will overhaul the Higher Banking Council, the sector’s main regulatory authority, and specify the powers of the Banking Control Commission. It will also define criteria for identifying viable banks for recapitalisation (injecting new funds into the banks through contributions made by current or future shareholders) versus those to be merged or liquidated,” Noureddeen remarked.
Another critical step remains the passage of the “Financial Stability Law,” or “Financial Gap Law,” which has not yet been approved as a draft bill. This law is fundamental to resolving the banking crisis, as it will define how to address the existing loss gap and determine the level of deposit protection. Passing it transparently and fairly will be a decisive step toward restoring trust, delivering justice to depositors, and halting Lebanon’s ongoing collapse.
“Currently, the main challenge, particularly on the part of the Central Bank and the Banking Control Commission, is to begin making use of the legislation that lifted banking secrecy. This requires the commission to start auditing banks’ balance sheets, to assess the financial condition of each bank, and to form a clear picture of the portion of deposits the banking sector can currently guarantee. It also necessitates launching a detailed audit of the banking practices carried out over the past years. Without these steps, the lifting of banking secrecy will not contribute to achieving justice for depositors.
The government has also proposed a new law to scrap banking secrecy rules in Lebanon, which prohibits banks from disclosing customer information without their consent, even to government entities. The media outlets aligned with the banking lobby were quick to defend banking secrecy, saying it is needed to preserve the sector’s appeal and maintain confidence in it,” Noureddeen added.
While proponents of lifting banking secrecy say that removing such restrictions is necessary for implementing the restructuring of the banking sector, by uncovering the causes of accumulated losses and addressing them, the banking lobby fears the move would uncover major violations that generated significant profits for them at the expense of depositors’ funds. Among these practices are the “financial engineering” operations that yielded large profits for the banks while causing losses to the central bank, depleting the depositors’ funds it held.
Also, the “banking secrecy” clause resulted in situations where Lebanese courts lacked access to critical financial information for investigating cases of embezzlement, illicit enrichment, and other financial crimes.
“Even when Lebanon created the Special Investigation Commission in 2001 under the Anti-Money Laundering Law, to combat illegal banking activities, the law did not mandate the commission to provide information to judicial, regulatory, or tax authorities. Instead, it retained absolute discretionary power to assess whether any given incident constitutes money laundering, without giving any other authority the ability to appeal this assessment. The commission also remained under the control of the Central Bank governor, creating a clear conflict of interest. For this reason, the commission played no serious role in pursuing money laundering cases within Lebanon’s banking system,” Noureddeen concluded, a statement that illustrates the “Pandora’s Box” Lebanon’s banking sector became.