Central Bank tougher
on retail loans

Provisions by banks to be increased

Banks and financial institutions should create collective provisions for the portfolio of performing loans, according to an intermediate circular issued by The Central Bank (BDL).



The balance of these provisions should not be less than 0.5 percent of the value of the portfolio loans, by the end of 2014, one percent by the end of 2015, and 1.5 percent by 2016, according to the international standards and instructions set by the Banking Control Commission of Lebanon (BCCL).



Banks and financial institutions should individually create collective provisions for the retail loans portfolio that do not register default for more than 30 days. The balance of provisions should be 0.75 percent by the end of 2014 and 1.5 percent by end 2015.



They should also create a general reserve, calculated according to the value of the retail loans portfolio, equivalent to 0.5 percent of this portfolio, by the end of 2014 in addition to 0.5 percent annually over six years, as of 2015.



For real estate loans, the maximum financing provided by the bank or financial institution should be 60 percent of the value of purchased property or current value of the project under development. The guarantee should be at 60 percent. Excluded loans cover those provided by the Housing Bank, the Public Corporation for Housing (Iskan), and loans granted to military personnel.



Banks and financial institutions should define a clear policy to grant retail loans, the circular said. Car or housing loan should not exceed 75 percent of the value of the purchased car or home, except for loans granted by the Housing Bank, Iskan, the military, or through the housing lending/saving program provided by banks with special exemptions from the BDL.