Lebanon’s cabinet approved  on Friday a draft law aimed at addressing the country’s vast financial shortfall and restoring depositors’ funds, marking the most comprehensive legislative attempt so far to deal with the banking collapse that began in 2019.

The Council of Ministers endorsed the bill with 13 ministers voting in favor and nine against, following several lengthy sessions chaired by Prime Minister Nawaf Salam at the Grand Serail. 

Speaking after the session, Prime Minister Nawaf Salam said the legislation marked a necessary, if imperfect, step toward halting further erosion of depositors’ funds, restoring confidence in the banking sector, and laying the groundwork for economic recovery.

Salam acknowledged that the bill had triggered widespread controversy and what he described as “misleading narratives” about its content since it was first introduced to the Cabinet. He said the government felt compelled to clarify what the law actually provides.

Salam said the government’s plan would ensure that 85 percent of depositors recover their money in full, seeking to reassure a public battered by years of financial losses and restrictions on bank withdrawals. He stressed that the bonds envisaged under the law “are not empty promises on paper,” but are backed by $50 billion in assets held by the Banque du Liban, Lebanon’s central bank.

Depositors with larger balances would also recover their money in full, but over a longer horizon. They would receive $100,000 in cash first, with the remainder converted into tradable financial certificates issued by Banque du Liban. Salam stressed that there would be no condition delaying the start of repayments for large depositors, only a difference in pace. 

The prime minister firmly rejected claims that the certificates would be worthless. He said they would be backed by the central bank’s asset portfolio, estimated at nearly $50 billion, making them far more than “paper promises.”

Salam also addressed one of the most sensitive issues in the debate, insisting that the State would neither sell nor mortgage its gold reserves. To prevent any potential exploitation, he said, the draft law includes explicit provisions to protect the country’s gold holdings.

He also pushed back against criticism that the bill amounted to an amnesty for past financial wrongdoing. Salam said the law includes accountability provisions for the first time, alongside a renewed government commitment to complete forensic audits. 

According to the prime minister, individuals who transferred funds abroad before the 2019 collapse by exploiting their political or financial influence, benefited from financial engineering schemes, or received excessive profits or bonuses would face legal scrutiny and could be required to repay up to 30% of those amounts.

Salam said the law does not target banks as institutions, stressing that Lebanon cannot recover without a functioning banking sector. However, he acknowledged that trust in the system has been deeply damaged. The bill, he said, aims to protect depositors while forcing banks to reassess assets and recapitalize, allowing them to resume their role in financing the economy, attracting investment, and reducing reliance on cash transactions.

While admitting the legislation is not ideal, Salam said it represents a realistic compromise given Lebanon’s limited resources. He noted that amendments introduced during recent Cabinet sessions had improved the text but said it was impossible to meet all expectations.

He said the bill allows for repayment schedules to be shortened if economic growth resumes and capital inflows increase; a scenario he said could be facilitated by an eventual agreement with the International Monetary Fund. Such a deal, he added, would help unlock international aid, donor funding, and foreign investment. The law includes provisions allowing Banque du Liban to accelerate repayments if conditions improve.

Responding to criticism that the bill relies on assumptions rather than fixed figures, Salam said no one could accurately predict Lebanon’s economic trajectory over the next decade. He warned that continued delays would only deepen losses and further undermine confidence, which he described as the cornerstone of any financial reform.

On the question of the state’s alleged $16 billion debt to the central bank, Salam said the figure was not definitive and had been proposed unilaterally. He said a formal mechanism had been approved to assess the issue jointly between the Ministry of Finance and Banque du Liban after audits of the central bank’s assets are completed. Regardless of the final figure, he said the state would meet its legal obligation to recapitalize the central bank, as required under Lebanon’s monetary law.

Salam also denied reports that the bill includes preferential shares, saying no such provision exists.

He said the legislation would now be sent to parliament by decree, pending the required signatures, and urged lawmakers to debate and approve it quickly. He said he would welcome amendments that strengthen the bill without undermining its core objectives.

The bill was introduced as part of resumed cabinet discussions on restoring financial order and recovering deposits. For the first time since the onset of the crisis, the government has put forward a fully fledged draft law on the financial gap, designed to confront the scale of the collapse, restructure the financial sector and distribute losses. According to Salam, the text largely aligns with International Monetary Fund requirements, a key condition for unlocking any external financial assistance.

Under the draft law, deposits up to $100,000 would be repaid in cash over four years. For deposits exceeding $100,000, only the first $100,000 would be paid in cash, while the remainder would be converted into bonds with repayment terms of 10, 15, or even 20 years.

As the Cabinet met, dozens of depositors staged a protest near the Grand Serail, demanding full and immediate access to their savings.

The banking sector, however, has voiced strong reservations. Banks argue that the draft law contains fundamental shortcomings, notably the absence of a transparent and definitive calculation of the financial gap at the central bank. They also criticize what they see as a failure to clearly acknowledge the state’s direct and indirect responsibility for the crisis, as well as the lack of serious consideration of the central bank’s ability to contribute by liquidating part of its assets.

Banking representatives warn that the current approach could undermine depositors’ rights, erode confidence in the financial system and expose Lebanon to further financial instability. As an alternative, they have proposed using part of the country’s gold reserves to provide the liquidity needed to address the crisis.

The central bank itself took part in the deliberations, acting as an adviser to the government and providing the figures available to it. While involved in shaping the discussions, the central bank is also not fully satisfied with the draft law in its current form, according to officials familiar with the talks.