BEIRUT – Lebanon's money market is entering a new phase of transparency, with the government approving the adoption of Bloomberg's trading and financial markets platform.
This comes in a step that folds the era of the "banking" platform, which was approved by the former governor of the Central Bank of Lebanon, Riad Salameh, in May 2021, and quickly turned according to experts, into an illegal and opaque exceptional case, which was unable to perform its function of controlling the exchange rate of the lira, which has gradually lost more than 98% of its value, since the fall of 2019.
The government's approval of the Bloomberg platform came in response to a request submitted by acting Central Bank Governor Wassim Mansouri to Finance Minister Youssef Al-Khalil, which is among the terms he promised to implement since he took over from Salameh on July 31 until the appointment of an authentic ruler, as Mansouri considered that "banking lacks the principles of transparency and governance."
Mansouri said the bank would restrict access to a new currency trading platform due to be launched within weeks, ensuring dollars circulating in the system came from legitimate sources.
While the launch of the platform will take about two months before it enters into force, and in light of the training of human resources in banks and financial institutions, experts believe that it may become the executive tool for Lebanon to enter the stage of liberalizing the exchange rate of the lira, as Bloomberg will reflect the free price of the dollar, based on the mechanisms of supply and demand and buying and selling operations in the market.
An official source at the Central Bank of Lebanon explains to Al Jazeera Net the details of the work of the Bloomberg platform, and focuses on its standards of transparency.
The source says that "all financial operations will become through banks, or through financial institutions that have high standards for combating money laundering, and the platform will gradually stop the lines of movement of cash money, because the monetary economy exposes us to high risks and international accountability, and Bloomberg will become more like a document for all dollars monitored by banks and financial institutions."
The source reveals that the central bank is seeking to issue new circulars that allow legal money changers to register with Bloomberg, provided they have a trained anti-money laundering office or team, to remove doubts about the source of the dollars.
The official source reports that all people and institutions are able to benefit from "Bloomberg" after completing their procedural and technical papers, and various commercial banks are supposed to register on the platform, because not registering means that the bank is unable to buy and sell dollars, noting that some banks are already registered on the platform, and they will all undergo training on it.
The World Bank previously said that Lebanon spent about $ 2022.2 billion on "banking" in 4, taking into account the dollars that entered and exited through it, while the official source reports that its actual cost in 2022 is estimated at one billion and 200 million dollars.
Bloomberg platform will replace the internal system known as Shutterstock banking
Benefits and pros
The official source summarizes Bloomberg's work in Lebanon by translating the actual reality of the dollar exchange rate, controlling financial operations, and obliging those who want to transfer a sum of money abroad to install its source through the platform, provided that the owner of the amount has transferred the amount from the pound to the dollar through the platform and not through the black market, and the dollar exchange rate takes its natural range without the intervention of the Central Bank.
However, the source talks about the many challenges facing Bloomberg, such as the difficulty of fighting the black market, and the absence of a political solution and government reforms will make things difficult.
"The Bloomberg platform will play a role in the reforms required by the IMF, and through it Lebanon will have a private market on a global platform with absolute transparency," he added.
The source confirms that the platform is aimed at regulating the state's finances and its relationship with the central bank.
Currently, economists and bankers are wondering about Bloomberg's upcoming roles, whether they will lead to the unification and liberalization of the exchange rate, as well as its role in determining the value of retained deposits.
Here, banking expert Ali Noureddine told Al Jazeera Net that the details of Bloomberg's work are not officially clear, but "its desired goal is to be a mediator to produce a floating and free exchange rate for supply and demand, and to produce a reference exchange rate for the market."
Despite its importance, academic and banking law expert Sabine Kik believes that the Bloomberg platform reflects a necessary technical measure, but it is not a solution, and in order to succeed it must be recognized as a real and official rate by the Lebanese state, "because the central bank's continued adoption of 15,<> as the official exchange rate is illogical."
Cake says to Al Jazeera Net, "Mansouri succeeded in absorbing the shock of Riad Salama's exit and its impact on the money market coinciding with a relatively prosperous tourist season. But he walks between the hard points without going into the issue of depositors." She considers that the most important challenge for the Bloomberg platform is to become dependent on the exchange rate of retained deposits in banks.
Najib Mikati's government has previously estimated the losses of the banking system at about $ 70 billion, and there has been no official agreement on how to distribute the losses between the state, the central bank and commercial banks, and depositors continue to fear being held responsible for deducting from their deposits.
Therefore, Sabine believes that any banking and financial solution that does not include the fate of deposits remains incomplete, in addition to the need to restructure banks and carry out the central bank's duties in terms of providing dollars to the state.
At the same time, Noureddine believes that any attempt to replace "banking", which has cost Lebanon millions of dollars, is a positive development, "after it was a banking allowed to specific groups and privileged and achieved huge profits as a result of its lack of transparency."
For some time now, the lira has maintained its volatility with a small margin at the 89,<> threshold to the dollar.
Noureddine says Bloomberg will succeed when its price becomes the market's free exchange rate, citing some apprehension about the central bank's performance. "If the central bank goes away by withdrawing from the market, it may later be unable to control the movement of speculation that will lead to a new phase of the collapse of the lira, and fears will escalate that speculation will lead the exchange rate and not the other way around."
Noureddine believes that the CBE will be able – through Bloomberg – to control banks with natural cuts in buying and selling to customers.
On Mansouri's performance, the banking expert said: "Mansouri played a positive role in terms of putting the government and parliament before their responsibilities just to say that they will not allow the lending of dollars to the state outside the legal frameworks, contrary to the approach of 3 decades of lending policy pursued by Salameh."
However, in Noureddine's opinion, there are responsibilities for Mansouri and the Central Council, most notably:
- Their performance in the path of unifying the exchange rate of the lira and floating it based on the balance of supply and demand, and based on an effective monetary policy by the Central Bank away from lending.
- How to secure a dollar trading instrument for the state, because its institutions cannot buy dollars on the black market while the central bank is the state bank.
- Test the balance that Bloomberg will achieve in the banking and financial sector and the relationship with the state.