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Before the start of the economic crisis in Lebanon in 2019, the then country’s central bank governor, Riad Salameh, held a strong reputation as one of the leading central bankers globally.
But at the end of his mandate on July 31, he left with a sullied reputation, described by many as one of the world’s worst central bank chiefs in the world. Salameh is now a target of financial crime investigations in six European countries and Lebanon.He is a wanted man by Interpol and sanctioned by the United States, the UK, and Canada.
His role in Lebanon’s economic collapse hasn’t gone unnoticed. Over the last few years, his monetary policies, along with government corruption and mismanagement, led to a crisis marked by falling growth, currency devaluation, banking sector collapse, and widespread poverty.
In 2016, Salameh launched a financial engineering scheme that weakened the banking sector, fueling extensive public debt and impacting the Lebanese population.
Salameh’s personal wealth probed
But Salameh not only fed the government for its reckless expenses in an import-reliant country with low productivity. He also allegedly benefited himself, as revealed by the investigations in Lebanon and abroad.
According to the investigations, Salameh and four associates allegedly transferred about $330 million (€303 million) from the Banque du Liban (BDL) central bank to Europe between 2002 and 2015. These public funds were purportedly used for purchasing luxury real estate and assets in Europe. Salameh has consistently denied any wrongdoing.
The investigations led France and Germany to seize his assets and call for an Interpol arrest warrant, though Lebanon declined extradition citing domestic law. However, the US, the UK, and Canada imposed sanctions, leading Lebanon to freeze Salameh’s assets in the country.
A corrupted system
Salameh represents only the tip of the iceberg of a highly intricate network that has governed the country for decades.
“I compare Salameh to Meyer Lansky,” Roy Badaro, a Lebanese economist, told DW, referring to the American mafia figure known as the “Mob’s Accountant.”
“Salameh was part of the corruption ring in Lebanese politics, utilizing it for personal gain through embezzlement of public funds,” he said.
Lebanon’s central bank lacked transparency, as highlighted in the long-awaited report by Alvarez & Marsal (A&M), a global professional services firm contracted by the Ministry of Finance. The report also emphasized a concentration of power in the BDL governor’s hands beyond the central bank norms and lack of proper controls over it, unconventional accounting methods to mask negative outcomes, and inflated assets and profits while reducing losses.
Sami Nader, director of the Levant Institute for Strategic Affairs, told DW that there were no checks and balances and no governance system inside the BDL.
“Within the BDL, institutional organs are staffed by government-appointed individuals, operating within a sectarian system led by leaders who emerged from the civil war and inherited this structure,” he said.
Multiple reports have affirmed the connection between the ruling class and the banking system.
Lebanese paid the highest price
As a result, the misconduct and corruption within the BDL benefited a few and burdened the population.
“Thousands of professionals and private sector workers entrusted their savings and sometimes entire retirement funds to local banks. But middle-class people have now plummeted into poverty, with retirees unable to afford medication or secure their old-age needs, and forced out of retirement to secure basic necessities,” Farhat Farhat, economist and co-founder of Lebanon’s Depositors Union, told DW.
When asked what interim BDL governor Wassim Mansouri could do to combat corruption within the central bank, Nader said: “Corruption cannot be stopped due to the prevailing system. The interim governor stated he won’t lend money unless there is a law.”
“Mansouri now seems to wait for the system to create the law and maintain flawed policies. This underscores the lack of change,” he said.
Economist Badaro argues that repealing the banking secrecy law is a valuable approach to combat corruption as it has encouraged nontransparent behavior.
“We don’t need banking secrecy anymore. To address corruption, we must eliminate impunity. For the reconstruction of Lebanon, accountability is essential,” he said.
The BDL has a crucial role in meeting Lebanon’s requirements for securing the $3-billion aid package from the International Monetary Fund, a staff-level agreement reached in 2022.
However, Farhat thinks Lebanon doesn’t necessarily need IMF assistance but rather independent, reputable decision-makers making economic and financial decisions.
Meanwhile, BDL is planning various reforms like capital control and financial restructuring. Yet, their approval rests with a parliament stuck with selecting Lebanon’s next president.
Edited by: Uwe Hessler
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