One of the most striking aspects of the latest legislative session was that Hezbollah emerged as one of the strongest supporters of the government’s version of the law to reform and restructure Lebanon’s banking sector—a version that is closer to the International Monetary Fund’s position on some of the most sensitive provisions, particularly those concerning the distribution of powers between Banque du Liban (BDL) and the Higher Banking Commission.
This convergence is noteworthy. The issue goes beyond a technical disagreement over the wording of one provision. It touches on the governance of Lebanon’s financial and monetary system and raises a fundamental question: Are we witnessing a reform designed to build more independent and accountable institutions, or a redistribution of powers that could ultimately become, in practice, a redistribution of political influence within those institutions?
The Problem Begins with Article 3
One of the most significant amendments adopted by Parliament was the removal of a phrase that Banque du Liban Governor Karim Souaid had insisted on retaining: “in compliance with the Code of Money and Credit, particularly Article 70.”
The purpose of including this language, according to the governor’s position during discussions in the Finance and Budget Committee, was to prevent ambiguity between the powers of BDL’s Central Council and those of the Higher Banking Commission, and to limit the latter’s role to the resolution and restructuring of troubled banks.
Removing this phrase is not merely a linguistic detail. It reflects a broader direction toward giving the Higher Banking Commission greater latitude in managing bank resolution, while weakening the legal safeguards the governor had sought for the powers of the Central Council.
This is where one of the central problems with the new framework emerges. Modernizing the mechanisms for dealing with distressed banks is essential after the collapse of Lebanon’s banking sector. But distributing functions that had largely been concentrated within Banque du Liban among a range of bodies and committees does not automatically create a more efficient system.
If the boundaries between these institutions are not clearly defined, and if the mechanisms for appointing their members are not insulated from political interference, the result could be a weakening of the center of decision-making without the creation of a more independent or effective alternative.
A Larger Commission—and More Politics?
These concerns become more serious with the expansion of the Higher Banking Commission and the inclusion of specialists whose nominations are proposed by government ministers.
In principle, bringing experts and specialists into a body responsible for highly complex decisions concerning banks, shareholders, depositors and creditors is both positive and necessary.
The problem is not the presence of specialists. It is how they are selected.
When experts are nominated through ministers who, in practice, represent different political forces, a legitimate question arises as to whether Lebanon’s quota-sharing system is simply being transferred from traditional political appointments into supposedly “technical” positions.
In that case, politics would not be removed from the management of the financial sector. Instead, it could gain new points of entry under the banner of modernized governance.
The issue is particularly sensitive because the new commission will have a direct role in managing distressed banks. Its decisions will therefore affect the distribution of billions of dollars in losses and the rights of depositors, shareholders and creditors.
Article 13 and the Shift in the Center of Power
The issue becomes even clearer in Article 13, which was adopted according to the government’s version rather than the version approved by the Finance and Budget Committee.
The article gives the Higher Banking Commission, with the approval of a two-thirds majority of its members, the “right to request” that Banque du Liban issue circulars governing the process of resolving a distressed bank.
Governor Karim Souaid objected to this provision on the grounds that it infringed on the powers of BDL’s Central Council. He proposed replacing the term “circulars” with alternatives such as orders, decisions or executive measures.
The distinction may appear legalistic, but it reflects a deeper struggle over the source of regulatory authority. A central bank circular is not merely an administrative measure. It is one of the principal instruments through which Banque du Liban exercises regulatory authority over the banking sector.
If another body is legally empowered to request that the central bank issue circulars relating to bank restructuring, then the relationship between the Central Council and the Higher Banking Commission must be defined with exceptional clarity. Otherwise, Lebanon risks creating a system in which authority overlaps and responsibility becomes increasingly difficult to assign when decisions fail.
Article 13 also reinforces the requirement to recover funds that were transferred after October 17, 2019 on a discriminatory basis that harmed the rights of depositors and creditors—an essential component of any serious attempt to address the inequalities created after the onset of the financial crisis.
Shareholders and Deposits
Under Article 11, Parliament adopted the government’s version, which limits participation in bank recapitalization to minority shareholders while excluding majority shareholders and those who exercised control over the bank’s management. This differed from the approach favored by the Finance and Budget Committee and its chairman.
Article 23, however, went in almost the opposite direction.
Parliament adopted the Finance and Budget Committee’s version despite objections from the finance minister and the IMF. Under the approved wording, if a bank is liquidated, deposits are to be covered according to the standards and provisions of the financial regularization and deposit recovery law.
The finance minister objected on the grounds that such a provision could impose additional liabilities on the Treasury—something the IMF has sought to avoid in determining how the costs of Lebanon’s banking crisis should be distributed.
His objection reportedly culminated in the remark: “Today, you killed the law.”
This detail is important because it demonstrates that the final legislation is not simply a copy of the IMF’s preferred framework. On some provisions, most notably Article 23, Parliament moved in a direction contrary to the preferences of both the Fund and the government.
The Hezbollah–IMF Paradox
The most striking political paradox, however, remains Hezbollah’s position on the provisions governing Banque du Liban’s authority.
A party that has built a significant part of its political discourse around opposition to foreign tutelage and international interference found itself, in this legislative battle, aligned with the IMF in opposing language that would have provided clearer protection for Banque du Liban’s powers, particularly under Article 3.
That does not necessarily mean that the two sides share the same motives.
The IMF approaches the issue from the perspective of reforming governance and oversight structures and limiting the broad powers that it believes contributed to the failures of the previous system.
Lebanese political forces, however, cannot automatically be assumed to share the motivations of an international technical institution. This is where it becomes legitimate to ask whether some political actors view the fragmentation of powers currently concentrated within Banque du Liban as an opportunity to redistribute those powers among institutions that may be more accessible to political influence.
In Hezbollah’s case specifically, its strong support for a formula that reduces the legal protections surrounding BDL’s institutional independence raises a question that cannot simply be ignored:
Does Hezbollah believe that the new structure will give it—or Lebanon’s political establishment more broadly—a greater margin of influence over the banking sector that emerges from the restructuring process?
This is a political question and an interpretation, not a fact established merely by the party’s vote in favor of the legislation. But Hezbollah’s strong support for the government’s version, coupled with its opposition to amendments sought by Banque du Liban to protect the powers of its Central Council, makes the question a legitimate one.
The Problem Is Not International Standards
None of this should be interpreted as a defense of Banque du Liban’s old institutional model.
Lebanon’s financial collapse is itself sufficient evidence that the previous system requires fundamental reform—in governance, oversight, accountability and the definition of institutional powers.
Applying international standards and best practices to the resolution of distressed banks is also something Lebanon urgently needs.
But international standards cannot be imported selectively.
If powers are to be distributed in order to prevent excessive concentration of authority, then appointment mechanisms must simultaneously prevent the concentration of political influence.
If independent bodies are to be established, their members must be selected through procedures insulated from sectarian and partisan quota-sharing.
And if accountability is to be strengthened, Lebanon needs an independent judiciary capable of holding officials accountable regardless of their position, sectarian affiliation or political protection.
Transferring powers from one institution to five institutions, and then distributing political influence over those institutions among competing political forces, does not necessarily constitute reform.
It could simply become a decentralization of Lebanon’s quota-sharing system.
Reform Will Be Tested in Implementation
The greatest danger in the current legislative process is that laws carrying the title of “reform” may contain provisions that create new structural problems once they are implemented.
A system can appear highly modern on paper yet become paralyzed if powers overlap. A body designed to be technical can become a forum for political bargaining if its appointments are subject to political balances. And a distribution of authority intended to prevent monopolization can produce precisely the opposite problem: the dilution of responsibility.
That is the real test of the banking reform law.
The question is not simply whether Lebanon satisfies the IMF’s requirements or secures its approval. Nor is it merely whether certain powers are taken from the central bank governor or transferred to the Higher Banking Commission.
The more important question is: What institutional system will emerge from the ruins of Lebanon’s old banking model?
If the process produces a weaker central bank, a greater number of decision-making bodies, increasingly fragmented powers and appointments that are more vulnerable to political intervention, Lebanon may simply replace a system that failed because of concentrated authority and weak accountability with one that fails because authority is fragmented and accountability disappears.
From this perspective, Hezbollah’s defense of the government’s version carries political significance beyond the technical details of the legislation. It may reflect a conviction that redistributing Banque du Liban’s powers serves the party’s vision of the future financial system, or that the new institutions will provide greater room for political influence.
Either way, Lebanon must ensure that restructuring the banking sector does not become an exercise in restructuring the same political quota-sharing system.
Real reform is not about changing the names of institutions or redistributing seats and powers among them. It begins when expertise determines appointments, independence governs decision-making, the judiciary provides accountability, and no political or sectarian actor enjoys protection when responsibility must be established.
Only then can international standards become an instrument for building a modern state rather than a legal framework for replacing an old system of influence with a new one.