On December 26, 2025, the Lebanese government passed the Financial Stabilization and Deposits Repayment Act (FSDR), a law that aims to tackle the systemic financial crisis in the country by distributing the burden of its resolution across the state, the Central Bank of Lebanon (BdL), and commercial banks. While it was approved by a 13-9 vote in the Cabinet, its reception has been far from favourable, with widespread criticism from unions, political figures, and economic experts. The backlash stems from concerns that the plan constitutes a “heist” of depositor money, potentially relieving the government of its obligations, while offering vague and ambiguous terms in repayment. The so-called repayment plan came without numbers, timelines, or any quantification of obligations.
It was a repayment plan in theory–numbers, however, were deemed optional.
In a politically charged atmosphere, the law was heavily influenced by external pressure from French President Emmanuel Macron, who reportedly made calls to Lebanese political leaders to ensure that the government of Prime Minister Nawaf Salam could move forward with the plan. This article takes a closer look at both the positives and negatives of the FSDR, reflecting on the reasons for its approval and the critiques it has faced.
Key Aspects of the FSDR
The FSDR law sets out several principles aimed at dealing with Lebanon’s ongoing financial crisis, which many experts argue is rooted in a combination of monetary and fiscal failures. Contrary to earlier narratives that blamed the crisis on reckless banking practices or the greed of bankers, the FSDR law officially acknowledges that the crisis is systemic in nature. The law assigns shared responsibility for the crisis between the state, the BdL, and the commercial banks, marking a departure from laying the blame on the Banking sector alone.
Another notable element of the plan is its acceptance of the principle of “irregular claims.” This means that not all deposits should be treated equally when repaid—those that involve irregularities (such as suspicious deposits, dollarization at advantageous exchange rates, or excess interest) would not be compensated in the same way as regular deposits. This decision targets opportunistic behaviour by wealthy individuals, including politicians and bankers, who had used loopholes to transfer funds abroad or settle loans under favourable conditions.
In terms of repayment, the law proposes that deposits under USD 100,000 would be repaid in cash, while those exceeding this amount would be repaid through securities backed by BdL’s assets. These securities would be tradable, offering some liquidity to depositors, although the repayment would occur over a prolonged period, rather than all at once.
Positives of the FSDR
Criticisms and Negatives of the FSDR
Pursuant to Article 13 of the Code of Money and Credit, the BdL:
As a result, neither the BdL nor the commercial banks can be compelled to comply with a rigid repayment schedule unilaterally imposed by the government. The determination of any deposit repayment schedule must therefore fall within the competence of the paying entities themselves and must take into account considerations of equity, proportionality, and, above all, the liquidity actually available.
In response to the government’s rigid repayment schedule, the BdL has put forward a more pragmatic and sustainable approach. The BdL’s proposal suggests that, starting in Year 0, depositors would receive 20% of their owed amounts in cash, with the remaining balances to be repaid over time, depending on the size of the deposit:
BdL emphasizes that a poorly calibrated repayment schedule would put unsustainable pressure on the liquidity of both BdL and commercial banks, particularly in a situation where the State makes no direct financial contribution to these repayments. The BdL argues that any repayment framework that risks suffocating the sector is neither legally defensible nor economically sustainable.
BdL firmly maintains that irregular claims, as defined by the FSDR Law and identified through the revaluation of BdL’s balance sheet, must be eliminated at the level of the banking sector (bank by bank, with a mirror effect on BdL’sbalance sheet) prior to the conduct of the Asset Quality Review (“AQR”) at each bank, and that only thereafter should the hierarchy of claims be applied.
This position directly contradicts the approach advocated to the Government by the IMF, which calls for a reversal of this sequence. BdL rejects such reversal on legal, accounting, and prudential grounds.
Across established resolution regimes—whether:
loss allocation may only occur after the identification and elimination of irregular or non-performing claims.
Departing from this principle would:
Conclusion
The Financial Stabilization and Deposits Repayment Act presents a bold but highly controversial attempt to address Lebanon’s ongoing financial crisis. While the law introduces important principles like shared responsibility and the elimination of irregular claims, its lack of liquidity testing, legal ambiguities, and the rigid repayment schedule have made it unpopular with the public and experts alike. The law’s success hinges on whether its complex repayment framework can be effectively implemented, but the lack of transparency around numbers and political pressures make this uncertain. As the law moves forward, it will be crucial to monitor its implementation and see whether it can restore trust in Lebanon’s financial system, or whether it exacerbates the crisis further.