Financial troubles piled up for Bassam al-Sheikh Hussein, a father of two, amid the crisis that struck Lebanese banks and upended the lives of thousands of depositors, himself included. Speaking with anger and frustration, he summed up his situation: “This crisis turned my life upside down… I can’t trust anything anymore. To me, they’re all liars.”
Bassam’s financial and living conditions did not improve. He was forced to shutter his small shop and move to side jobs, and the impact of the worst crisis in Lebanon’s history still weighs on his daily life.
Five years after the largest banking collapse in Lebanon’s history, Financial Public Prosecutor Judge Maher Shayto issued a decision compelling bankers and legal entities to repatriate funds transferred abroad during the crisis, in the same currency.
Since October 2 019, when Lebanese banks closed for two consecutive weeks following the outbreak of the popular uprising, public trust in a sector long considered the “pillar of stability” has been shaken. Extra-legal restrictions on withdrawals and transfers turned depositors’ accounts into frozen numbers, while multiple exchange rates wiped out what remained of purchasing power.
During this period as well, a source at the Association of Banks in Lebanon told Daraj that banks continued paying around US$3 million annually to traditional media outlets—an amount that does not include bank ads aired within news bulletins or political programs.
Recovering the “Transferred” Funds
A banking source told Daraj that Judge Shayto sent a list of names required to return funds estimated at US$1.2 billion: US$1 billion attributed to bankers and US$200 million to politicians. Meanwhile, the total amount transferred abroad since late 2019 is estimated at US$6 billion, according to former Finance Ministry Director General Alain Bifani in comments to the Financial Times.
This judicial step was the first of its kind since the crisis and the subsequent transfer of funds abroad by certain powerful politicians and bankers—while ordinary depositors were barred from accessing their money and subjected to illegal withdrawal caps. Notably, recent Banque du Liban circulars raised the withdrawal ceiling for some accounts from US$400 to US$800 per month.
A judicial source confirmed to Daraj that the individuals named on Judge Shayto’s list have begun receiving notifications one by one, and that those concerned are expected to comply within a short, specified time frame. Should they refuse, legal measures will be taken against them.
Attorney and lecturer in tax law and public finance Karim Daher explained that “the real breach began before the uprising, in September 2019, when the funds of politicians and major investors were transferred without any controls, while small depositors were left stuck in the banks.” This characterization shows that what occurred was not a sudden crisis, but rather a programmed collapse involving all components of the ruling system, according to Daher.
Roots Deeper Than “Transfers”
Lebanon’s banking sector did not collapse overnight. Its fragility had been revealing itself since the mid-1990s, when Lebanon relied on capital inflows rather than building a productive economy. In 2016, the “financial engineering” promoted by the central bank as a magic solution turned out to be a time bomb.
Those schemes granted extraordinary profits to banks and covered state deficits using people’s deposits. Daher describes them as an “illusion of stability”—paper profits masking real losses accumulating on the central bank’s balance sheet.
In April 2019, just months before the financial meltdown, Bank Audi distributed over US$260 million to its shareholders—including former Prime Minister Najib Mikati, former central bank governor (now imprisoned) Riad Salameh, and others. A Daraj investigation showed the bank had benefited from the financial engineering and special facilities provided by the central bank, including debts that exceeded US$2 billion, while Lebanese depositors were left with trapped deposits, barely able to access a small portion of their own money.
Financial engineering was one of the main reasons that led to the crash. It began with BankMed and Bank Audi, facilitated by the special arrangements offered by Riad Salameh, and later expanded to include the rest of the banks. Through these operations, banks reaped enormous profits, according to professor and financial expert Mohammad Farida.
These maneuvers yielded massive returns for banks and for certain privileged depositors who had access to such facilities. According to the audit report by Alvarez & Marsal, the total cost of these financial engineering operations conducted by the central bank reached nearly $76 billion.
From Financial Crisis to Social Tragedy
The crisis was not purely financial; it became a full-blown social tragedy. Hyperinflation turned access to food and medicine into a luxury. According to a World Bank report published in May 2024, nearly half of the Lebanese population now lives in extreme poverty. Unemployment surged, businesses shuttered, and inequality deepened between a small minority holding “fresh dollars” and a crushed majority.
In this equation, small depositors were the biggest losers. They lost everything, while the politically connected and wealthy elites either transferred their money abroad or preserved it safely offshore. As lawyer Karim Daher points out, “the absence of a Capital Control Law enabled selective treatment: some were able to extract their funds while others remained trapped in the banks.”
On November 11, 2019, the Association of Banks in Lebanon announced that it had received verbal instructions from the central bank to impose withdrawal limits. According to Daher, this was unlawful: there is no such thing as verbal decisions, and the Association of Banks has no legal right to enforce them.
Depositors: Between Bank Raids and Legal Battles
During this period, banks witnessed multiple raids by depositors demanding their own money — a phenomenon that falls under Article 420 of the Lebanese Penal Code, described as “self-redress,” or reclaiming by force what has been wrongfully withheld.
In 2019, Bassam Sheikh Hussein’s mini-market collapsed with the onset of the crisis. Dollar fluctuations eroded his business, power cuts worsened the strain, and, as he recalls, “What broke me most was the hospital bill after my father fell ill.”
Desperate, Bassam turned to his bank under Circular 158, hoping to access his funds. After constant obstruction, he stormed the bank to retrieve the money needed for his father’s treatment. Negotiations eventually secured him $35,000, but later he dropped his lawsuit — even though he had won — fearing a drawn-out appeal process.
Another depositor, Firas Tannous, a marble trader and father of two, had his account arbitrarily shut down following a dispute with the branch manager. The bank then issued him a check, but the notary public refused to accept it. “We had millions in the bank, today it’s pennies,” he told Daraj, explaining how his children needed food, medicine, and milk.
Unable to provide for them, Firas sent his family abroad while he remained in Lebanon, fighting to reopen his account. When he pressed ahead with legal action, the presiding judge, Zaher Hamadeh, reportedly told him: “Why do you want to reopen the account? Keep it closed, it’s better!” Ironically, this is the same judge Speaker Nabih Berri had attempted to install as Financial Prosecutor.
By 2022, when nine major bank raids were recorded, banks retaliated with unlawful countermeasures: shuttering their branches entirely and even disabling ATMs, leaving depositors with no access to their savings.
The Civil War Connection
After the Lebanese Civil War, the country emerged in total ruin with a fragile state structure. The government attempted reconstruction but relied on foreign capital rather than investing in productive sectors. In 1997, the lira was pegged to the U.S. dollar. On paper, the plan appeared successful: relative stability and increased investment. But in reality, the economy became hostage to tourism, expatriate remittances, real estate speculation, and bank deposits luring citizens with high interest rates.
This “apparent stability” was a mere illusion. Successive governments accumulated debt, and Lebanese banks funneled most of depositors’ savings into financing the state, leaving themselves vulnerable to sovereign risk and draining liquidity. As lawyer Karim Daher noted: “Financial engineering was nothing more than a mask concealing accumulated deficits. When dollar inflows stopped, everything collapsed.”
From the end of the war and the beginning of reconstruction, a new relationship developed between certain Lebanese banks and bankers on one hand, and owners of dubious funds on the other, according to economist Mohammad Farida. He explained that “these ties deepened with the spread of corruption during reconstruction, revealing the scale of illicit money that poured into the Lebanese banking sector.”
Farida further clarified that the system rested on a clear trinity: the banks, owners of illicit funds, and corrupt politicians. This “trinity” controlled the country’s major financial and economic operations, with the central bank governor, Riad Salameh, serving as one of its chief architects alongside the three power blocs that sustained it.
The Bottom Line: A Cycle of Collapse—and How to Break It
The financial meltdown cannot be separated from the culture of impunity established after the civil war. Without genuine accountability in political, security, and financial cases, any recovery plan will remain nothing more than a painkiller. Breaking this cycle requires: an independent judiciary, fair legislation for loss distribution, transparent accountability that restores victims’ and depositors’ rights, and ultimately, the restoration of the state’s credibility and society’s trust in itself.
Since the passage of the General Amnesty Law after the war, major cases — including war crimes, enforced disappearances, and sectarian killings — were closed for political and moral reasons. Instead of building a judicial memory and capable institutions, the very warlords responsible for atrocities returned to power in new guises. The formula of “stability in exchange for truth” became entrenched. This legacy was never dismantled; instead, it expanded into the realms of economics, governance, and public finance. Impunity became the governing principle of political and financial performance.
Over the following decades, grave cases piled up — political assassinations, security explosions, and, most devastatingly, the Beirut Port explosion — but the pattern remained the same: political interference, removal of judges, jurisdictional disputes, aborted hearings, and endless lawsuits to stall investigations. Truth remained suspended, justice delayed, and victims’ rights held hostage to perpetual maneuvering. Under these conditions, the judiciary transformed from an independent authority into a battlefield for political influence and economic interests, corroding public trust and eroding any sense of legal security.
When the financial collapse hit, the same old formula was applied again: political management of the crisis instead of organized and responsible accountability. Lawmakers stalled on enacting clear rules for loss distribution and protecting small depositors. The executive and financial authorities clashed over figures and plans, while real accountability remained limited and selective.
Measures like the recent decision by the Financial Prosecutor compelling some bankers and politicians to return illicitly transferred funds are notable, but they are no substitute for a comprehensive path that includes: establishing clear responsibility, binding forensic audits, systematic asset recovery, and judicial reform to free the courts from political interference.
This piece was achieved through the support of the Samir Kassir Foundation
