Organization

Our Departments

Off-Site Supervision

Off-site Supervision Department is responsible for the on-going monitoring of banks and NBFI to ensure financial soundness of institutions. The department also ensures effective enforcement of regulatory and supervisory policies, monitors risk profiles, evaluates financial performance of individual banks and NBFI on solo and consolidated basis, prepares off-site risk reports, suggests enforcement actions and follows up on the institution’s compliance with the corrective measures.

To effectively discharge its function, the department uses variety of quantitative tools, including CAMELS-BCOM rating system, peer group review in addition to key financial indicators calculated from regular prudential information related to on- and off-balance sheet, profitability, capital, liquidity, large exposures, risk concentrations, asset quality, related party transactions, interest rate and market risk.

These are in addition to qualitative information including corporate governance, internal controls, risk management derived from on-site inspection reports, external audit reports, supervisory reports of subsidiaries operating abroad, Memorandum of Understanding in addition to frequent meetings and continuous dialogue with the institution’s senior management.

The Studies Department is responsible for preparing the required studies and analysis of banks, Financial Institutions transactions and requests. These include but are limited to:

  • Licensing and establishment of Lebanese commercial , investment or Islamic banks and other financial institutions (locally and abroad).
  • Establishing foreign financial institutions branches or representative offices in Lebanon.
  • Opening and closing of banks / financial institutions branches (locally and abroad).
  • Opening of representative offices of Lebanese banks abroad
  • Banks / Financial institutions mergers and acquisitions.
  • Transfer of significant ownership or controlling interest in banks / financial institutions held either directly or indirectly.
  • Increase of Capital, allocation of cash contributions, issuance of stocks and bonds, and capital restructuring.
  • Other matters related to banks / Financial institutions requests concerning compliance with Lebanese banking rules and regulations.

The studies Department was established in October 2001. It is responsible for studying thoroughly the applications and requests of Banks and Financial Institutions.

In addition to the above, the Department recommend to BCCL board the proposed decisions on the requests received. The studies and analysis takes into consideration (where applicable) the compliance of each Bank / Financial Institution with prudential rules and regulations, and other indicators generated by the other off – site departments (after evaluation the Bank / Financial Institution risk profile, taking into consideration the Lebanese banking / Financial Instituions sectors risk profile).

The Department may also conduct certain “on – site” spot reviews in the objective of verifying certain requests and analysis when needed.

The Risk Assessment Department was established in 2009 as a move toward Risk-Based Supervision. Its mandate is to ensure that banks have in place a comprehensive risk management process to identify, measure, evaluate, monitor and control or mitigate all material risks and to assess their averall Capital Adequacy and Liquidity Adequacy in relation to their Risk Profile and in line with Basel III requirements.

The Risk assessment process adopted by the department includes a review of the quality, quantity and availability of capital and liquidity resources of banks.

A wide range of supervisory techniques are used, including Stress Testing exercises that provide information on the major vulnerabilities and identify major risk concentrations for each bank.

The Risk Assessment Department supports the On-Site teams and relies on their assessment of the quality of risk management and internal controls surrounding material risks.

The main functions of the “Large exposure” (LE) department are:

  • Conducting a preventive supervision of borrowers having critical sized exposures in the banking sector.
  • Unifying loan rating of a LE borrower among banks.
  • Elaborating economic sector studies in coordination with the “Regulations, Macro prudential and Consumer protection” department.

The Main objectives of the “LE” department can be resumed as the following:

  • Avoiding unexpected delinquencies among LE borrowers that could lead to major losses for the different players in the banking sector.
  • Reducing systematic risk and contagion risks in the banking sector.

Preventive supervision consists of three majors tasks:

  • Performing a Risk Focused Study approach for each LE’s borrower.
  • Reviewing LE portfolio at specific deadlines. These deadlines are set according to borrowers rating and performance.
  • Tracking and Monitoring, periodically, the major changes in the loan exposure of LE borrowers.

Since 2016, the department became also in charge of assessing debt restructuring plan requests, as per BDL circular No. 135, and got involved in spreading banks’ awareness.

This department specializes in monitoring the compliance of banks with the conditions of government subsidized loans. The Department studies a sample of subsidized loans in banks and ensures that they are in accordance with BDL and BCC circulars.

The department checks invoices & statement of accounts of subsidized loans, and verifies the conformity of loans utilization with the purpose of the loan. Other functions of the department are review of early settlement of subsidized loans, and loan transfer from one bank to another, in addition to investigation of financial groups.

The subsidies take two different forms. The first form is the payment of part of the interest paid by certain borrowers in a particular sector. These loans are:

  • Industrial loans, Touristic loans, Agricultural loans, Software and technology development loans, and handicrafts loans.
  • Loans that are guaranteed by Kafalat S.A.L. (a company which guarantees some loans to small and medium enterprises).
  • Loans granted according to the agreement signed between the Lebanese government and (the European Investment Bank – IFC – AFD).

The other major form of subsidized loans is exemption (or reduction) of Legal Reserves held at BDL. These loans are extended to the following categories:

  • Subsidized loans guaranteed by Kafalat S.A.L.
  • Housing loans granted by banks based on a protocol signed with the Public Housing institution.
  • Housing loans granted by banks based on a protocol signed with the Military volunteers housing unit.
  • Long term housing loans that banks grant to their clients, and which are subject to the exemptions that long term and investment banks are subject to.
  • Private and public sector bonds denominated in foreign currency and purchased without recourse.
  • Direct loans that the banks grant to the public housing institution to construct buildings for rent by limited income groups.
  • Loans granted to the Housing Bank S.A.L. that are used to finance the loans granted by the bank.
  • Micro credits granted with the approval of Micro – Credits Institutions.
  • Housing loans granted by banks based on a protocol signed with the Mutual Fund of the Magistrate.
  • Housing loans granted by banks based on a protocol signed with the Directorate General of the ISF.
  • Housing loans granted by banks based on a protocol signed with the Directorate General of the SG.
  • Housing loans granted by banks based on a protocol signed with the Ministry of Displaced.
  • Loans granted by banks to finance the environmental loans in both energy and non-energy.
  • Loans granted by banks for High School Education.
  • Loans granted by banks based on a protocol signed with the Ministry of Agriculture.
  • Loans granted by banks to students to buy tablets.

The department is in charge of two functions:

  1. Regulatory Development: The department is responsible for developing prudential Regulations and implementation guidance on policies issued by the Central Bank of Lebanon, based on sector needs and in line with international standards and best practices.
  2. Macro Prudential Supervision: The department is responsible for identifying and monitoring risks and trends within the Banking Sector, and macroeconomic developments in countries where Lebanese banks have significant activities, based on a set of tools and indicators, to address proactively potential risks. It prepares regular banking sector stability reports highlighting main developments and risks.

The “Real Estate Department” mission consists mainly of appraising real estate properties that banks intend to acquire or real estate properties provided as collateral for loans. These real estate properties are classified according to the following:

  • Real estate that a bank intends to acquire for its own use (Head Offices, branches, warehouses for archiving, etc…).
    These properties cannot be acquired by the bank unless the acquisition is approved by the Banking Control Commission of Lebanon (BCCL) after the appraisal of the “Real Estate Department in the  BCCL”
  • Real estate that the bank intends to acquire as foreclose if the debtor is unable to repay his loan to the bank..
    In this case, the Real Estate Department appraises the property before the BCCL gives its approval to the bank for the acquisition, in order to check that the value is fair for both parties.
  • Real estate provided as collateral against facilities or loans granted to debtors.
    The BCCL, as part of its on – site audit of the credit files, appraises some real estates provided as collateral (on a sampling basis) to ensure that it adequately cover the facilities granted.
  • When deemed necessary, the BCCL re-appraises some of the real estate properties mentioned in the above sections, in order to assess their current market value. In which case the concerned bank is asked to provide a provision for the real estate properties which have decreased in value.

In appraising real estate properties, the Real Estate Department uses a group of about 200 professional Real Estate Appraisers, consisting of “Engineers” and “Certified Real Estate Experts” with long experience and good reputation.

The Information Technology department at BCCL was established in 1991.

It is responsible for the development and maintenance of an information technology environment that would enrich the examination process with automated and meaningful reports and analytics.

The IT department main roles are:

  • Developing, maintaining, and upgrading the BCCL central Oracle Database applications.
  • Collecting electronic data from Banks and Financial Institutions.
  • Validating and processing the collected data to produce informative indicators.
  • Developing analytics and produce informational reports.
  • Maintaining and managing the Data Warehouse application which provides remote access to on-site examiners from the banks which they supervise.
  • Maintaining the well-being of the IT infrastructure, networks, and computer equipment.
  • Automating the various business functions at BCCL.

On-Site Supervision

On-site Examination/Review is the earliest established activity of the BCCL and remains the core instrument of banking supervision in Lebanon.

The BCCL has, at any time, around 10 On-site teams reviewing banks and other financial institutions under its supervision.

Each team is made up usually of 3 to 7 members headed by a team leader.

The frequency (and comprehensiveness) with which On-site reviews are conducted depend on each bank’s internal risk-rating. The ratings are not published, and are restricted to the BCCL Board.

The On-site review covers several issues, through a comprehensive process (On – site Examination Manuel). The issues covered are specified in the “Outline of the On-site Reports”, which is an internal document for the use of On-site examiners. The review usually covers :

  • Loan Portfolio : The sample covered depends on several factors and can go up to 90% of the loan portfolio of a bank. Each loan reviewed is classified by the examiners. Reserves/Provisions are set accordingly as and when needed.
  • Sovereign Exposure : Banks are required to have a study that sets the ceiling of their sovereign exposures. These Ceilings would depend on factors, such as the bank’s liquidity and capitalization. The currency of debt instruments is also taken into consideration
  • Banks : Exposure to other banks is analyzed. It is a requirement that exposure to other banks be set after appropriate study of each bank / correspondent and its financials and ratings.
  • Capitalization, Earnings and Liquidity: of each bank is reviewed. The review covers the accuracy of numbers. More importantly, it covers their adequacy compared to norms set internationally (e.g. by Basel Committee) and locally (by the BDL & BCCL).
  • Management : Management systems are reviewed with close scrutiny. Both the organization and how well it functions are analyzed. Particular emphasis is given to controls. Staffing is given special attention as well, especially in terms of adequacy. Risk Management in banks has become an important part of the focus of the On-Site examination as well as Corporate Governance ; Banks are expected to comply with Central Bank regulation issued in July 2006, which is based on Basel guidelines issued in February 2006.
  • Market Risks.
  • Operational Risks.
  • Information Technology: Assessment of the banks’ Systems accuracy and security, the Business Continuity Plan.
  • Anti Momey Laudering (AML): Assessment of the banks’ AML process and implementation.

Basel II / III Implementation : The On-site teams carry out an assessment of each banks’ Action Plan for the  implementation of Basel accords and analyses their Pillar I Capital Adequacy in addition to their Liquidity and conduct a Supervisory Review and Evaluation Process (SREP) on the ICAAP exercises of banks

The department’s objective is to maintain financial stability of the Non-Banking financial sector through continuous On-Site & Off – Site supervision of financial institutions regulated by Banque du Liban. Those institutions perform a wide range of activities such as:

  • Financial markets operations: Market making/liquidity providing, asset management, brokerage services and loan providing against securities.
  • Specialized lending through factoring and leasing operations.
  • Loans to small medium enterprises (SME), retail banking and micro finance.
  • Investment banking and advisory services.

The Financial Institutions supervision is based on Risk Based Approach (RBA) and allows the BCCL to grade them according to their overall risk profile which is the result of the impact and the probability of occurrence.

The risk profiles determine the scope of the On-Site missions that range from a thematic to a full scope mission. However, spot missions are conducted based on early warning indicators provided by the Off-Site unit within the department that monitors Macro & Micro prudential indicators on regular basis.

The Islamic Banking department at the BCCL was established in 2012. Its mission is to put in place a sound and effective framework of supervisory policies, standards, controls and instruments that conform to international best practices and comply with Islamic banking activities and applicable laws and regulations in Lebanon.

The main functions of the Islamic Banking department are:

  • On-site Supervision of Islamic Banks: The department conducts full onsite examination of Islamic banks. The study covers, in addition to the portfolio assessment, risk management, corporate governance, anti-money laundering, management, capital adequacy, liquidity, compliance with prudential ratios, laws and regulations.
  • Special on site Missions to address specific regulatory issues.
  • Special Reporting System: The department is developing a special reporting system for Islamic banks that takes into consideration the specificities of Islamic Banking.
  • Financial Analysis Template: The department is in the process of preparing a financial analysis framework for Islamic banks that covers all risks that banks are subject to, and the additional risks that Islamic banks bear, due to their specific modes of operations and transactions.
  • Review and Update Guidelines and Regulations: The department reviews and updates continuously the guidelines and regulations applicable to Islamic banks.

The Department supervises the Money Exchange Institutions, the Electronic Money Transfer Firms and Specialized Lending Entities (Comptoirs) operating in Lebanon in a risk based supervision approach.

The main functions of the department could be summarized as follows:

The Exchange Institutions:

  • Making specific recommendations to the license Cancellation of Exchange Institutions, when off-site or on-site examinations show that the conditions set by the Central Bank are no longer met.
  • Conduct on-site reviews by the examiners, This task aims to follow up on the findings by the off-site Examination..
  • Both the on-site and off-site reviews evaluate management, and examine compliance with different rules and regulations covering the Money Exchange business.
  • Moreover, the findings related to the Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) laws and regulations are coordinated with those of the S.I.C.
  • A Risk Focused Supervision is being initiated since the beginning of the year 2014.
  • Making recommendations for licensing new Money Exchange Houses.
  • Conduct specific targeted examinations (changes in ownership, change of venue, complaints etc… ).
  • Conduct off-site examinations over Money Exchange Houses.

The Examination is based on:

  1. Auditors Annual Reports through the control of the numbers in the balance sheet, and income statements.
  2. Periodic and monthly Reports from Money Exchange Houses.
  3. Special Investigation Commission (S.I.C.) reports.
  4. Monthly bank-note and metals shipments reports (from Exchange Houses and Commercial Banks).

Electronic Money Transfer Firms:

  • Making specific recommendations to the license Cancellation of Electronic Money Transfer Firms, when off-site or on-site examinations show that the conditions set by the Central Bank are no longer met.
  • Conduct on-site reviews by the examiners, this task aims to follow up on the findings by the off-site examination.
  • Both on-site and off-site reviews evaluate management, and examine compliance with different rules and regulations covering the Electronic Money Transfer Firms.
  • Moreover, the findings related to the AML and CFT laws and regulations are coordinated with those of the S.I.C.
  • Making recommendations for licensing new Electronic Money Transfer Firms.
  • Conduct specific targeted examinations (changes in ownership, change of venue, sub- agents reviews, complaints etc…).
  • Conduct off-site examinations over Money Exchange Houses.

The Examination is based on:

  1. Auditors Annual Reports through the control of the numbers in the balance sheet, and income statements.
  2. Periodic and monthly Reports .
  3. Special Investigation Commission (S.I.C.) reports.

IT Control Department’s objectives and tasks:

  • Supervise Banks and Financial Institutions (FIs) on Operational Risk with regard to BDL and BCCL related Circulars and Memos, inspired by international IT security standards and directives, such as: ISO, BIS, ISACA, NIST, ITIL, BASLE, ISF…
  • Draft IT Security Circulars, in line with the banking business and technology evolution.
  • Provide guidance to Banks and FIs for implementing scalable and secure Information Systems in the purpose of decreasing the risks of systems instability and inadequate operability..
  • Ensure that Banks’ and FIs’ Information Technology Management Systems are providing reliable operations and truthful financial reporting thru consistent, verifiable, resilient and secure processes.
  • Ensure that Banks and FIs procure adequate technology and business continuity plans.
  • Perform Onsite Periodic and Ad-hoc IT supervisory missions.
  • Coordinate IT supervisory issues with financial interrelated examiners.
  • Provide Banks and FIs with the recommendations issued by BCCL’s Management, resulting from Supervisory Onsite missions, and follow up periodically their proper implementation.
  • Assess Banks’ and FIs’ requests for new acquired technology and services.
  • Interact where appropriate, with Banks and FIs on IT and security issues or breaches.
  • Collect and Analyze Banks and FIs’ IT reported Data.
  • Review external auditors’ reports as required by BDL and BCCL IT related circulars and memos.