Why Beirut is the leading [fb01] nancial capital in the Middle East

With its plethora of bars, restaurants, hotels, sun, sea and sand, Beirut is fast becoming one of the Middle East’s leading tourist centers. The numerous attractions, especially for Arabs from the Gulf with its cool climate and glittering Mediterranean, see the decadent capital continuing to attract plentiful investment from global and particularly Gulf-based finance houses. And that is despite the unrest and assassinations Lebanon faced in the first half of 2005. Yet it is not only in the realm of tourism and investment that Beirut is slowly coming back to its own. The capital is also the Levant’s leading banking center with some of the biggest banks in the region dealing with hundreds of millions of dollars in deposits and capital on a daily basis. The confidence that was lost in this sector after the killing of former Premier Rafik Hariri in February is today returning especially after the appointment of a former finance minister, Fouad Siniora, to lead the new government.

One of the most important elements in this return of confidence can be seen not only in the brand new headquarters of banks such Audi Bank and Lebanese Canadian Bank in Beirut’s up-market downtown central district, but also in the continuing consolidation of the commercial banking sector. In late August 2005, BLC Bank announced it was looking for buyers after it announced profits rising by a third to $20 million for the financial year. Lebanon’s Central Bank took over BLC in mid-2002 to rescue it from bad loans that had left it teetering on the edge of bankruptcy. An injection of $147 million in capital to absorb losses and the appointment of a new chairman in Shadi Karam saw BLC’s fortunes improve to today’s strong position. For Riad Salame, governor of the Central Bank, consolidation is the way forward if Lebanon’s banks are to continue to flourish, and Beirut is to increase its attractiveness as the serious financial capital in the region. The 2004 merger of Bank Audi with Saradar Investment House, which making it the second biggest bank in Lebanon, led the way. Salame has insisted that the banking sector needs to consolidate to increase its capital and be able to replace international banks forced to withdraw from emerging markets in general following the international resolutions of Basel II. The Central Bank governor insisted, however, that though he takes a positive position on mergers, the Bank would not impose them on the markets. Still, ultimately the plan is for Lebanon’s banks, which number over 50 groups and hold much of the nation’s $36 billion public debt, to consolidate. And when that happens, Beirut will consolidate its position as the leading financial centre in the Middle East.