Dear MH,

I don't quite understand your confusion/question.

Lebanese banks make money just like any other banks - they give out loans & collect interest on them and they invest in profitable business ventures.

What they did NOT do, because they were forbidden to do so by the central bank (in essence following Basel 1 & 2), is to invest in subprimes and derivatives.

Over the past few years, from the time of the 2006 Summer War all through the political paralysis that lasted until May 2008Lebanese banks have made much of their profits abroad. Lebanese banks were at the forefront of going into Syria and Sudan, when both countries' financial systems opened up.

I hope that answers your question.

--MSK*

2008Lebanese banks have made much of their profits abroad. Lebanese banks were at the forefront of going into Syria and Sudan, when both countries' financial systems opened up.

I hope that answers your question.

Indeed it does, thanks, that's the kind of detail I was looking for and not clear from the article -- where are their profitable loan operations (if any), foreign, domestic, what sectors, etc.

Dear MH,

Bob Worth is a good journalist, but he's not really wired into the business aspects of life & in any case it is a NYT article for general consumption.

The FT is better in this regard or (if I may toot my own horn) Executive Magazine (www.executive-magazine.com).

In-country, Leb banks are very good at creating the kind of loans that locals go for - mainly real estate, but also cars, education, and even plastic surgery. Lebanese (and others in the region) trust Leb banks, which explains the high percentage of deposits in their assets.

Local banks are heavily investing in the local & regional real estate market, which is a safe bet yet yields high returns. And going into emerging (banking) markets like Syria & Sudan was also a safe bet - loads of those country's citizens flocked to the new (private) banks, and so did SMEs.

Cheers,

--MSK*

What they did NOT do, because they were forbidden to do so by the central bank (in essence following Basel 1 & 2), is to invest in subprimes and derivatives

What provisions in Basel I & II that would have prevented Lebanese banks from doing what other banks in developed markets did (which btw, are also supposed to abide by them)?

There's a very simple reason why Lebanese trust their banks btw. Political decision makers in Lebanon happen to be the ones who directly own them.

Nothing in Bale I or II prevents banks investing in any of those instruments.

The Leb Cen Bank may have forbidden such things, but that would have had fuck all to do with Bale - unless the rules were tied to implementation of proper risk management systems, etc.

One thing MSK missed out is that the Lebanese banks have historically (I'm not sure about the present condition) made a lot of their money by lending to the government, which particularly from Hariri's time onward has always had massive debts, about half of which, maybe more, have been to local banks.

See also: Hariri's Clever Scheme.

...hijacking...
Reading my comment from back then is an experience, given the partial nationalization of US banks.
It'll be fun seeing how it turns out.
My pension should be better though, now that I'm kind of a government employee, right? Hmm...