The Bank-Sector Crisis in Lebanon: Structure, Shock, and Reform Prospects

الملخص

Lebanon’s financial collapse since late 2019 represents one of the most severe sovereign-banking-currency crises of the 21st century. The banking sector — historically large relative to GDP, tightly interconnected with sovereign finance, and exposed to extensive unhedged currency and maturity mismatches — has been central to the crisis’ propagation. This paper documents the structural features of

Lebanon’s banking sector, traces the main shock channels (sudden stop of capital inflows, currency mismatch, central bank quasi-fiscal operations, and informal capital controls), quantifies macroeconomic consequences (GDP collapse, hyper-inflation, poverty surge), and evaluates reform options. Using official reports (IMF, World Bank, Banque du Liban), forensic audit findings, and high-quality news/investigative sources, the paper proposes a phased program for financial sector restructuring, depositor-fair burden sharing, currency unification, governance reforms, and conditional external financing. Concrete legislative and regulatory steps and a roadmap for implementation are presented. The paper includes two illustrative charts (GDP trajectory and exchange-rate evolution) and a comprehensive bibliography.