European Banks Cut Ties with Lebanon, Severing Correspondent Relations

According to anonymous banking sources cited by Lebanese daily L’Orient-Le Jour, Germany's Commerzbank AG has halted its correspondent banking connections with at least three Lebanese financial institutions due to a "lack of profitability", reports The Cradle. However, experts argue that this explanation is merely a "pretext" and suggest that the decision is more likely a consequence of concerns regarding Lebanon's potential grey-listing by the Financial Action Task Force (FATF) due to money laundering issues, as well as the issuance of a red notice by Interpol against Central Bank Governor Riad Salameh.

Ghassan Shammas, a monetary advisor interviewed by Al Akhbar, revealed that banks in the Netherlands, Belgium, Sweden, and other Scandinavian countries have also adopted a "de-risking policy" to terminate or reduce their interactions with Lebanese commercial banks. Although such a policy is generally implemented as a precautionary measure by banks due to poor profitability or money laundering concerns, there are growing apprehensions that this could escalate into a complete severance of relations by Western banks, given the failure of Lebanon's political leaders to address the severe economic crisis.

Correspondent banking relationships enable institutions in one country to maintain accounts in another country with a different currency, facilitating transfers between the two. If these connections are severed, Lebanese depositors will encounter significant difficulties, if not impossibilities, in conducting transfers to or from all European countries.