The rating action comes after Banque du Liban, the Lebanese central bank, released a document requesting banks to pay in Lebanese pounds half of the interest due on customers’ US dollar-denominated term deposits existing and not matured before December 5.

“This is contrary to the terms of the original contractual agreements,” S&P Global said in a statement late on Wednesday.

“The circular is the latest in a series of recent measures by the central bank and the Association of Banks in Lebanon, including restrictions on US dollar-deposit withdrawals, the limitation of transfers of money abroad, and limits on cash conversion from Lebanese pound to the dollar at the official rate.”

Lebanon has been crippled by an economic crisis as nationwide anti-government protests that began on October 17 continued to demand the removal of sectarian political factions, as well as the country’s ruling elite.

The ongoing protests have closed banks, blocked transport routes and reduced the availability of cash, creating a perilous environment for small businesses in recent months, business owners previously told Al Arabiya English.

S&P typically assigns this type of rating when it believes that the obligor has selectively defaulted on a specific issue or class of obligations but will continue to meet its payment obligations on other issues or classes of obligations in a timely manner.

“We lowered our ratings to 'SD' because, in our opinion, private individuals' lack of access to their bank deposits on time and in full, different remuneration from the original contractual terms, and constraints to their ability to transfer funds abroad constitute a risk for depositors of losing the benefit of their agreements and therefore a selective default,” S&P said.

The ratings agency believes that some of these measures in Lebanon could become tighter in the future, since liquidity in the politically turbulent country is diminishing, “causing banks to possibly face near-term mounting pressure on their funding positions.”