Sunday, 26 October 2008

The Anomaly of Lebanese Banking

Everyone seems to have an identity crisis these days. People seem obsessed about their ancestors and their origin and and...No one seems to come from anywhere anymore, but the more of a fruit salad you are, the more interesting of a person.

I am Lebanese.

Ok, I am a bit of a fruit salad,I speak with a slight American accent, grew up trilingual, at home we celebrate every religious occasion there is (we almost celebrated festivus, and we are not even religious!) , my mom is English, my dad spent most of his life in Germany, and my immediate family is scattered along 4 continents, and I don't even look Lebanese. But I am, and I am proud to be! Why would I want to be proud of a country that's historically known for its struggles and their inability to agree on a single thing?!

Well, our banking system for one.

Lebanon's banking system has been the rock of our country, and if we had an economy, it would be it's cornerstone. Lebanese people (like the Jews) are very good at math , and people networking. Now if that's not spelling out F-I-N-A-N-C-E, I don't know what is. Whether locally or abroad , Lebanese people have excelled in the financial industry, to amazing levels. For our small country, Lebanese people have achieved considerable heights, but when it comes to money, we are in a class of ourselves (at least if you measure against the relative population) that unlike other domains where alot of us Lebanese excel outside the country, when it comes to finance, we excel both at home and abroad. London and New York, stink with Lebanese financiers, and Dubai, is literally there playgroung, but I am not talking about that.

Lebanon, was one of the few, if not the only, country whose banking system was not hit by the credit crunch. In fact, Lebanese banks, have made better than average profits during this period.

BLOM Bank and Audi Saradar, with Byblos bank not too far behind, have actually made record profits. BLOM, the biggest bank by deposits, has seen a 34% rise in its profits in the first 3 quarters of 2008. These three banks, are publicly listed on the Beirut Stock Exchange and would be equivalent to a AAA class stocks in the West. They are leading stocks, i.e. stocks that set the pace for the stock exchange index (gaining or loosing) , alongside Solidere, which is the other leading stock. Now, Solidere, is the development company for downtown Beirut area, in terms of construction. And it's a leading stock, as the housing market, and especially, the real-estate market in Lebanon, is booming, and sky-scrappers and high rise buildings are springing up in Beirut like there is no tomorrow. (If you don't believe me, ask Donald Trump, he's invested in Lebanon - well his ex-wife at least).

The Lebanese state, is the only state besides Switzerland, that has a banking-secrecy law. In fact, it's even harder for public authorities to get access to financial information regarding a certain individual in Lebanon, than it is to get it from a Swiss bank (true story - go ahead and try). If this is not an enough reason for UHNW individuals to move money to Lebanese banks, with all the commossion in the West, Lebanon is a very elegant and attractive place for Gulf Oil money. So much, that back in 2006, there was more deposits in Lebanon ($80bn) than there was in Kuwait ($75bn) , an oil producing country. (That's running accounts that is- which is possibly the closest you can get to the real information) What is held by the private (such as Saradar Private bank, part of the Audi Saradar group), investment , and asset management divisions, of these banks, is almost like massive hedge funds, where the banks have no obligation of releasing information about their investors. I know for a fact, that alot of oil money, sits in Lebanon.

If you don't believe me, well, get a load of this. US Hedge funds, are moving money into Lebanon, and it was reported by the New York Times. It's not me blaberring. But maybe, that's because our central bank forbid banks from getting into derivatives 3 years ago.Seems like a smart move, from Riad Salameh, our CB Governor, who won the World's Best Central Bank Government award by Euromoney in 2006- Mervin King take notice! We are not short of economists in our government either, with former minister of Economy Fouad Siniora heading the government cabinet as PM after long serving as Economy and Finance minister in all of slain Prime Minster Rafik Hariri's cabinets, with his deputy, Jihad Azour , now serving as Finance and Economy minister. (Now the Gordon Brown-Alistair Darling similarity is ridiculous!)

There are more banks, (58 banks as of October 2008) than there are banks in half the western countries, and almost as many banks as in Germany, the world's third biggest economy. Ok , am not comparing us with Germany, (Lebanon being the 77th economy in the world in GDP) , but well, with 4.5 million people in one country, that's one bank for less than 100,000 people. I still don't get it, but it works. At least Robert Fisk thinks so!

But the way I really know, is that, well, my friend works in the IT department at BLOMInvest, the investment arm of BLOM bank, and well, he said, in all the software they develop, they use "long integers", and have to support 12 digit numbers, in all applications.

That's alot of zeros.............and that's excluding the two zeros to the right of the decimal point!

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