You may or may not have spotted this headline and, even if you did, you might have thought ah well, it’s Lebanon. I’ve been to Lebanon and can say it’s a fantastic country full of amazing history. Sure, it has its troubles, and those troubles have escalated in recent times, but it is a country that has a banking system, same as yours and mine. Except when things go downhill, the banking system breaks down. This is the reason why many countries that have unstable governments or unstable economies have switched to cryptocurrencies and bitcoin (not that that is stable).
Why am I blogging about this? Because the story intrigued me.
The story is about a coffee shop owner who, before all the troubles started, was quite wealthy. Then, in 2019, Lebanon entered the worst financial and economic crisis in its history, that has sunk the once middle-class country into poverty.
The crisis is rooted in years of political corruption and mismanagement. Lebanon is running out of foreign reserves and has gradually lifted subsidies on essential goods, including fuel and medicines.
But, if you were a Lebanese, what does that mean in reality? Well, it means that you find your wealth has more than halved in just eighteen months. That is surprising as, when I was there, Lebanon ran a dual system of currencies: the Lebanese pound and the US dollar. Everything was pegged to the dollar and US dollars were available at ATMs and for payment in all stores. That was meant to provide stability and surety, but it stopped when the crisis hit and this is where the issues arise because, in late 2019, Lebanese banks stopped giving dollars to depositors and instead allow withdrawals only in Lebanese pounds – currently at a rate about 65 per cent lower than the market rate.
In other words, if you had $1,000 in the bank in 2019, you would now get Lebanese pounds only with a reduction of value of 65 percent or more, and a point-blank refusal to return your original investments and holdings. In other words, the banking system has broken down under an economic crash led by government corruption.
Of course, this would never happen in your country, would it? But what if it did? What would you do?
Abdallah Assaii, a 37-year-old Lebanese coffee shop owner, robbed the bank to get his money back. It was his money, so was he really robbing the bank? Did he rob the bank or did he just make a claim for what is rightfully his?
The incident took place at a branch of Lebanese bank BBAC in the town of Jeb Jannine, in the Bekaa Valley, on January 18. Abdallah entered the bank branch and held seven bank employees hostage for four hours until they paid him his $50,000 US dollars in cash. The bank claims that Mr Assaii held a gun to the head of one of the bank staff, had explosives in his bag and sprayed petrol on the employees and on the floor, threatening to light a cigarette. Mr Assaii’s lawyer claims there was no threat and that he kept the gun in his bag and apologised to staff when the confrontation ended.
Either way, you may think his action a tad extreme, but is he right or wrong? Some say he’s a hero whilst others say he’s a criminal. But, if you had USD$50,000 in the bank and they said they could give you almost nothing in exchange, would you be happy with the trust you had in your bank?
“Abdallah managed to do what nobody could do in all of Lebanon,” said Abed Nabha, an NGO worker from Mr Assaii’s home town. “He didn’t steal the money. It was his”. His case “matters to every single person, including myself”, said activist Yassine Yassine from Ghazzeh, a town close to Kefraya. “They’re holding everybody’s money.”
A critical point here is that as the country’s economy and governance broke down, the banks behaved badly.
In November 2019, Lebanese banks imposed capital controls as dollars dried up. This was never approved by Parliament, and persistent rumours in Lebanese media claim that well-connected clients sent millions of dollars abroad, while Lebanese with more modest deposits saw the value of their savings plummet. In the absence of parliamentary oversight, the Banque du Liban central bank has issued circulars restricting withdrawals and transfers out of the country from banks, both in Lebanese pounds and US dollars.
“Everything that has happened so far are actions from the central bank that have no legal foundation,” said Nasser Saidi, a former Lebanese economy minister and first vice governor of the central bank. “Courts refuse to sue banks that have been delinquent in payment. The judicial system is no longer independent. It’s part of the political process”.
Luckily, as a post note to the siege, Mr Assaii was arrested and is currently being held by authorities, but not before he managed to get the cash into the hands of his wife, who was waiting outside and is now on the run.
Finally, why am I posting this here?
I guess because there are many nations with unstable economies and government. However, the whole foundation of banking is that they’re good for the money. When countries breakdown and the rich run off with the money due to political and bank favours and affiliations, leaving the common people in a poverty trap, I would hail people like Mr Assaii as more a hero than a villain. Oh, and recommend his wife puts the money into crypto.
Just a thought.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...