The Banking Executive Magazine - February 2026 Issue 2

Lebanon Fiscal Gap Law Decoded KEY CHALLENGES Lebanon’s Fiscal Gap Law of 2025 faces many challenges, beginning with deep political divisions in par- liament that threaten to delay or di- lute its passage, while commercial banks fiercely resist the government’s estimated $70 billion in losses, argu- ing the figures are inflated and warn- ing of systemic collapse if forced to absorb too much. Depositors, al- ready locked out of their savings since 2019, distrust the government’s pledge to recover 85% of deposits within four years, fearing they will bear disproportionate losses. At the same time, the International Mone- tary Fund has made the law a prereq- uisite for aid, meaning Lebanon risks losing crucial international support if implementation falters. Even if passed, weak institutions, lack of transparency, and the absence of bank-by-bank viability assessments could derail execution, leaving the law’s promises unfulfilled and further eroding public confidence in the fi- nancial system. OPPORTUNITIES Lebanon’s Fiscal Gap Law of 2025 presents significant opportunities de- spite the controversy surrounding it, as it marks the first formal acknowl- edgment of the country’s massive fi- nancial losses and offers a framework for recovery that could restore credibility to the banking sys- tem. By pledging to recover up to 85% of deposits within four years, the law brings hope to depositors who have been locked out of their savings since 2019, while also laying the groundwork for restructuring banks and strengthening financial governance. Most importantly, its passage is a prerequisite for securing IMF support and unlocking interna- tional aid, which could stabilize the economy, attract investment, and re- build trust in Lebanon’s financial in- stitutions, making it a potential turning point in the country’s long- running crisis. LAW ENFORCEMENT Enforcing Lebanon’s Fiscal Gap Law of 2025 will require coordinated ac- tion across political, financial, and ISSUE 206 FEBRUARY 2026 the BANKING EXECUTIVE 11 CHALLENGE Key Challenges Political divisions Banking sector pushback Depositor distrust IMF conditionality Implementation risks Delay or rejection in parliament Risk of collapse, disputes over losses Protests, loss of confidence Aid withheld if law stalls Failure to deliver recovery targets IMPACT ON LAW STAKEHOLDER Key Stakeholders in the Ecosystem Government (Cabinet) Parliament Central Bank (BDL) Commercial Banks Depositors IMF Civil Society/Media Drafted & approved law Must pass law Bears losses Absorb losses Recover funds External enforcer Watchdogs Pushes acknowledgment of losses, depositor recovery Divided factions, contentious debates expected Criticized for past financial engineering Oppose figures, fear collapse Hope for 85% recovery, fear deeper losses Requires law for aid Demand transparency, highlight depositor plight ROLE IN LAW POSITION/CONCERNS