As the escalation reaches its peak, questions loom about what happens the day after, once the guns fall silent and air raids cease leveling homes, villages, and crowded urban neighborhoods. What if the war were to end tomorrow? What emergency plans does the government have in place to absorb the shock of the social and economic devastation that would emerge once the smoke clears, revealing a landscape of flattened towns and cities?

At the very least, families who lost their homes should have a clear path to rebuild, whether through targeted local and international aid or accessible loans. Yet the obstacles are significant. Lebanon’s Code of Money and Credit, which mandates that all loans must be repaid in the same currency they were initially borrowed, complicates the potential for expanded lending, which remains vital for economic revival. Until this regulation is amended, Lebanese banks are wary of resuming large-scale lending, citing an uncertain legal framework and ongoing financial challenges.

Will Banks Resume Lending?

In recent weeks, Acting Central Bank Governor Wassim Mansouri proposed a return to bank lending, emphasizing its role in economic stimulation and the rebuilding of trust in the banking sector. Responding to Mansouri's call, Dr. Fadi Khalaf, Secretary-General of the Association of Banks in Lebanon, cautiously welcomed the idea, highlighting that it would help improve liquidity and stimulate economic growth. However, Khalaf stressed that the absence of a robust legal framework, ensuring that the lending process is safeguarded at every level, inhibits banks from advancing loans to individuals and businesses.

Speaking to Annahar, Khalaf outlined two critical steps needed before banks could confidently resume lending. First, he argued, Parliament must pass a law ensuring loan repayments can be made in the currency originally borrowed; this is especially relevant as the proposed funds for lending derive from “fresh dollar” deposits. Banks remain wary of lending in dollars without a law securing depositor funds, particularly in cases where borrowers might try to repay their loans in Lebanese pounds instead of the original currency.

The second step requires the Central Bank to amend its circulars, especially those mandating that banks deposit 100% of “fresh dollar” holdings with correspondent banks abroad. Amending this requirement, Khalaf explained, would free up funds for lending purposes. Currently, existing fresh dollar deposits are insufficient for extensive lending as they are largely allocated to comply with Circular 158 and cover limited operational costs.

Sources within the banking sector indicate that without addressing core financial issues—such as the Central Bank’s deficit and challenges related to “bank dollars”—the possibility of banks resuming large-scale lending remains unlikely. Although some banks have resumed limited loans to customers with “fresh” accounts, a full return to lending remains a distant goal as other institutions are awaiting government action on the recovery plan, IMF-driven reforms, and other long-standing issues before expanding credit operations.

Housing Bank Readies for Post-Conflict Loans

At the Housing Bank, Chairman and General Manager Antoine Habib noted that the bank has continued offering loans and is awaiting an additional installment from the Arab Fund, which provided a 50 million Kuwaiti Dinar (USD 165 million) loan over five years, with semi-annual disbursements of 5 million Kuwaiti Dinars (USD 17 million). To date, around 1,000 Lebanese have benefited from housing loans.

Habib confirmed that the Housing Bank is also in talks with the Abu Dhabi Fund and the Kuwait Fund to secure additional loans, preparing for an anticipated wave of requests as Lebanese citizens look to rebuild and repair their homes. He added that several Arab funds have expressed willingness to support the Housing Bank, which, having gained both regional and global trust, has the infrastructure in place to administer new loan programs effectively.