Lebanese banks conducted a two-day strike this week in protest of judicial orders targeting six banks as part of an investigation, as the conflict between Lebanon's judiciary and financial sector escalates.
The strike, which concluded on Wednesday, was a "warning" that "Lebanese banks can no longer tolerate the arbitrary decisions" and "abuse of financial policies," according to a statement by the Association of Banks of Lebanon (ABL). It further warned that it could "take other steps that may be necessary."
The strike came on the back of a judicial order to freeze the assets of six Lebanese banks and their leadership. The judiciary instituted the asset freeze as part of an investigation into potentially illegal transfers made by the banks and the Lebanese Central Bank (BDL).
The "warning strike" and the rhetoric by Lebanon's banks is a form of "blackmail," Dina Abou Zour, a lawyer with Lebanon's Depositors Union, told The New Arab.
"Now, courts are taking some good decisions towards depositors, so we are optimistic about legal actions we are going to launch," said Abou Zour.
Account-holders in Lebanon have had the majority of their deposits frozen in banks since the start of Lebanon's financial crisis in fall 2019. To many, this has meant losing their life's savings and financial ruin as the Lebanese lira depreciated by more than 90 per cent of its value to the US dollar.
According to the UN over two-thirds of Lebanese now live in poverty, double pre-crisis levels.
Banks have instituted strict monthly withdrawal limits, with depositors only able to take out their money under an unfavourable exchange rate – causing them to take a near 65 per cent haircut on every withdrawal over $US 400.
Accounts were frozen and withdrawal limits put in place unilaterally by the financial sector, without Lebanon's legislature authorising the capital controls.
Despite the existence of these illegal capital controls, large account holders and elites were able to transfer their money abroad at the beginning of the financial crisis.
Lebanese parliament has repeatedly attempted to pass a capital control law that would have basically formalised the measures the banks have already taken but has failed to do so thus far. The proposed law has been met with popular outrage for what is seen as the legislature forcing the lion's share of the financial sectors' losses on to small- and medium-size depositors.
To recover their money, a growing number of Lebanese have turned towards the judiciary, launching collective lawsuits to force banks' hands. However, banks have retaliated to the suits by launching strikes, closing depositors' accounts arbitrarily and suspending services.
In one such case, a British passport holder with an account in Lebanon sued Bank Audi to recover the value of their account.
After the British court ruled in his favour, Bank Audi and at least two other banks began pre-emptively closing the accounts of British passport holders, in what Abou Zour described as "an act of vengeance."
Some banks also temporarily stopped issuing depositors' money after last week's judicial asset freeze, claiming that the judicial measure forced them to seal up their vaults. Contrary to the banks' claims, the court order freezes the banks' assets and not the depositors' money.
A Lebanese judge also charged BDL's governor, Riad Salameh, with corruption charges on Monday. Salameh has not shown up for questioning and it was unclear if authorities would force him to do so.
Salameh faces investigations in five European countries over allegations of money laundering and embezzlement of upwards of $US 300 million.