An International Monetary Fund technical assistance report on Lebanon has concluded that the legal framework governing Banque du Liban is outdated and fails to provide sufficient guarantees for the central bank’s independence, accountability and transparency, according to portions of the document obtained by Lebanese news outlet Al-Modon.

The report includes a broad assessment of the legal and institutional framework regulating Lebanon’s financial sector, with a particular focus on the governance structure of Banque du Liban, its decision-making mechanisms, and its relationship with the executive branch, political authorities and the banking sector.

According to the report, the review focused primarily on the Code of Money and Credit (the main law governing the central bank’s operations) in order to evaluate whether it aligns with international best practices related to central bank independence, transparency, accountability and internal and external oversight.

The IMF report said its analysis was based on a comprehensive review of Banque du Liban’s legal objectives, the powers granted to the governor and the Central Council, the state’s role in the bank’s ownership and management, and the extent to which the current structure complies with modern principles of central bank governance.

The report comes as Lebanon continues grappling with one of the world’s worst financial crises in modern history and amid ongoing discussions over broader financial sector reforms required under any future IMF-backed recovery plan.

According to the report, the current legal framework allows excessive overlap between monetary policy, state financing mechanisms and banking sector regulation, weakening the central bank’s institutional independence and accountability.

The findings are expected to serve as a reference point in future efforts to reform Lebanon’s financial governance system.

The report concluded that Banque du Liban lacks sufficient operational and functional independence under internationally recognized standards for central bank governance.

According to the report, the law grants the finance minister broad powers to intervene in the bank’s operations, including the authority to suspend decisions issued by the Central Council and request their reconsideration. The finance minister also has the authority to convene meetings of the council.

The report further noted that the government commissioner appointed by the Finance Ministry can attend council meetings, access the bank’s records and suspend decisions when deemed necessary.

The IMF also identified political and legal constraints that limit the bank’s independence. Under the current framework, the governor of Banque du Liban and the deputy governors are appointed by decree issued by the Council of Ministers based on a proposal submitted by the finance minister.

The report said the law lacks sufficient safeguards to ensure appointments are based on merit and competence, while the rules governing dismissal or termination of mandates are not adequately protected from political interference.

The report also highlighted weaknesses in conflict-of-interest regulations, arguing that the current legal framework does not provide comprehensive safeguards against situations that could compromise the neutrality of Central Council members through private relationships or activities.

The IMF concluded that Banque du Liban’s independence is not sufficiently guaranteed because the current framework permits direct and indirect influence by the executive branch — particularly the Finance Ministry and the Council of Ministers — over the bank’s appointments and decisions.

The report therefore implicitly recommends amending the law to strengthen the central bank’s independence, increase transparency in appointments and shield the institution from political pressure.

The report also criticized Banque du Liban’s internal decision-making structure, saying it does not comply with international best practices because it fails to ensure a sufficient balance of powers or effective oversight of the governor’s authority.

According to the report, the Central Council itself lacks adequate independence from the government.

In addition to the governor and deputy governors, the council includes the director general of the Finance Ministry and the director general of the Economy Ministry as members from the public administration.

Because decisions are adopted by majority vote, the IMF warned that the presence of government representatives could undermine the central bank’s independence, particularly in sensitive matters involving monetary policy and financial sector regulation.

The report also noted that the law does not clearly establish a supervisory role for the Central Council over Banque du Liban’s executive management.

Although the council holds broad powers, it does not function as an independent board overseeing the governor and the institution’s executive leadership. The governor himself chairs the Central Council, creating what the report described as a conflict between policymaking and oversight functions.

The IMF also criticized the concentration of executive authority in the hands of the governor.

According to the report, the governor manages the bank, legally represents it, implements Central Council decisions and exercises broad authority over daily operations, while the deputy governors and advisory committee play only limited roles and do not constitute an effective collective decision-making body.

The report concluded that the central problem lies in the absence of a clear separation between executive management and internal oversight within Banque du Liban.

It recommended restructuring the decision-making process to strengthen collective governance, reduce the concentration of authority and establish a clearer separation between management and oversight functions.

The IMF report also highlighted serious weaknesses in accountability mechanisms under Lebanon’s Code of Money and Credit.

According to the report, the current framework lacks clear rules governing internal oversight, external auditing, financial disclosure and transparency toward both authorities and the public.

The report said the law does not clearly provide for a strong and independent internal audit function within Banque du Liban, nor does it adequately define the responsibilities of oversight committees or mechanisms related to risk management and compliance monitoring.

As a result, the report suggested the central bank’s internal oversight structure is not sufficiently robust to monitor sensitive financial decisions and operations.

The IMF also criticized the framework governing external audits of Banque du Liban’s accounts, saying it falls short of international best practices.

According to the report, the issue cannot be resolved simply by appointing external auditors, but instead requires broader legal reforms to guarantee auditors’ independence, clarify their powers and ensure the publication of reliable and transparent reports.

The report further criticized weaknesses in financial disclosure and transparency.

It said Banque du Liban’s financial statements are not fully prepared according to internationally recognized accounting standards, potentially allowing certain financial activities — particularly operations linked to what the report described as “financial engineering” — to remain insufficiently disclosed.

The IMF also noted that Lebanese law does not require the publication of fully audited financial statements in accordance with international standards and does not clearly establish whether all reports issued by the central bank are subject to legal disclosure and accountability requirements.

The report concluded that Banque du Liban requires a comprehensive legislative overhaul, including reforms to the appointment process for the governor and deputy governors, a redistribution of powers within the Central Council and changes to the bank’s broader governance structure.

It also stressed the need to strengthen the central bank’s independence by reconsidering the Finance Ministry’s oversight role and introducing clearer mechanisms for monitoring, auditing and financial disclosure within the institution itself.