Lebanon

Lebanon's banking system remains in the systemic crisis that began in 2019, when banks imposed informal capital controls that evolved into tight monthly withdrawal caps or outright freezes on US-dollar deposits. The Banking Control Commission supervised 57 banks and 37 financial institutions in May 2026. Commercial banks' consolidated balance sheet stood at LBP 8,988tn (about US$100bn at the official rate) in July 2026, close to three times 2025 GDP, because losses on banks' exposures to BdL and the sovereign have not yet been allocated under a legal framework.

The system is almost entirely dollarised and has largely stopped lending. According to BdL, deposits shrank to US$88bn by end-2024, with a dollarisation ratio of 99.1%, while loans to the private sector contracted to US$5.5bn, 97.7% of them in foreign currency. BdL's foreign-currency reserves rose by US$814m in 2024 to US$10.1bn, and the pound has traded close to the official rate. Access to formal finance has deteriorated sharply: account ownership fell from 45% of adults in 2017 to 23% in 2024.

Conventional solvency analysis offers little guidance. The World Bank describes the sector as insolvent and Lebanon reports no recent Financial Soundness Indicators to the IMF. The World Bank also judges public debt unsustainable and notes that debt restructuring negotiations have yet to begin. Bank capital, depositor recoveries and the size of any BdL recapitalisation therefore depend on the loss-allocation framework still under negotiation. Meanwhile, the aggregate balance sheet has been broadly static, edging down from LBP 9,015tn in April 2026 to LBP 8,988tn in July.

Renewed conflict since March 2026 has set back a nascent recovery: the World Bank projects GDP to contract 6.4% in 2026 after estimated growth of 4.2% in 2025, with inflation rising to 17.5%. The main risks for banks are the terms of the financial stabilisation and deposit recovery ('financial gap') law, which will determine how losses are shared between the state, BdL, banks and depositors; US sanctions targeting Hezbollah-linked networks, widened in May 2026; and continuing litigation and depositor protests.