Bank Mistakes – Here Beirut

It is now customary to anathematize banks, criticizing their ‘rentier’ operations unrelated to the real economy, which would have contributed to the outbreak of the current crisis. It is debatable, controversial … but after all, everyone is free to express their opinion. An anti-banking opinion therefore primary, which social networks have the task of making viral, thus creating ‘The digital jerk factory‘(title of a recent book by Michel Desmurget, French writer and researcher specializing in cognitive neuroscience).

So far nothing new, nor sadly shocking. On the other hand, what it is, is this mania – even viral – of relying on falsehoods, of which we will draw up a first list below.

– “The banks, and the bankers, have made huge profits.” Impostor. The net return on equity (ROAE) of banks averaged 10.8% in Lebanon, compared to 16.7% in emerging countries and 12.2% in the Middle East (in 2019). In addition, almost 60% of the profits were reinvested in capital. By comparison, investing in restaurants or real estate projects was much more profitable, with an average return on investment of three years.

– “The banks have neglected their main mission, which is the financing of the economy, favoring investments in the Bdl and loans to the state”. Impostor. Bank lending to the private sector reached $ 60 billion, or 108% of GDP (in 2018). With this rate, Lebanon was ranked 30And ranks over 200 countries.

– “Most of the private credits went rather towards useless consumption, such as loans for cosmetic operations or travel”. Still wrong. Of the 60 billion in loans, 69% in value was destined for various sectors of the economy, compared with 31% for private loans for consumer, education or home loans.

– “The banks have conducted a high-risk policy for real estate loans”. It is questionable. The risk of default by the customer, in fact, was minimal, as the credit was guaranteed. Hence, this policy has had undeniable positive social effects. First, it participated in the development of the construction sector, which supports 25 commercial businesses. Almost 150,000 subsidized loans were then granted (thanks to BDL engineering), with rates of 4 or 4.5%, over 30 years. Preferential rates (from 1 to 2%) have even been granted to soldiers and magistrates. This has allowed employees who never imagined they could acquire a home to become owners. It is a safe bet that many of the protesters – and the most virulent magistrates – have taken advantage of it. In addition, the repayment of the credit balance is still currently carried out at the rate of 1,500, which means that the burden on the debtors has decreased from 80 to 90%, the difference is borne by the banks.

– “The development of the banking sector has not contributed to the redistribution of wealth through taxes”. Impostor. Banks have been subject to higher tax rates than any other industry. And the banking sector was the only one to pay taxes in full, as it was subject to strict controls. Its tax contribution was equal to 58% of all taxes on profits of all companies, or more than 150,000 taxpayers, while it represents, with its 60 entities, only 8% of GDP. Likewise, it has declared the salaries of its employees in full, at a time when these salaries, with the associated social security contributions, are rarely declared as such in most companies.

And this is how we demonize an industry that, whatever we think, has worked legally, and we forget all those in power who have elevated plunder to the status of consummate art.

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