HSBC’s Lebanese operation is likely to be sold off to Blom Bank, for a fee rumoured to be around $100 million. It will be the end of an association with the country that began in 1946, when HSBC, then operating as the British Bank of the Middle East, opened for business in Beirut.
HSBC has said the move was part of a three-year plan to scale back operations and reduce annual costs by $5 billion and Lebanon was a prime candidate for the knife. Like Standard Chartered, ABN Amro, Credit Lyonnais and BNP Paribas before it, HSBC was unable to attract enough Lebanese customers and, through them, a share of the roughly $9 billion in remittances that flow into the country each year. On top of that, HSBC had higher costs; credit terms were stricter, and internal policies meant it couldn’t, as domestic Lebanese banks do, buy high-yield government bonds that would have allowed the bank to pay attractive interest rates on deposits.
But until the early ‘90s, foreign banks had always done well in Lebanon, especially during times of crisis or war when they were seen as a safer bet than local banks, which operated under a weak Central Bank. But then, the late Rafiq Hariri, during his time as prime minister, changed the face of Lebanese banking by selling debt to local banks to raise money to rebuild the country.
So what’s in it for Blom? The bank’s headquarters in the residential and business district of Verdun was bombed in June. No one was hurt and no one claimed responsibility for the attack, but it was widely seen as a message to the banking sector for cooperating with the US government in closing accounts linked to Hizbollah, the militant Shia party. Hizbollah denied any involvement and has since agreed to cooperate with the central bank, but if banks are going to close accounts they will want to avoid a reduced balance sheet and a potential loss of ranking and reputation, then they will need to find new, diversified account holders, which in theory, HSBC Lebanon can deliver.
Lebanon will be a poorer place without HSBC, and not just because another blue chip star has left a rapidly dimming banking constellation. It was an institution in Ras Beirut, holding faculty accounts for both the American University of Beirut and the International College.
In January 1976, one year into the civil war, over £25 million (Dh121.5m) – a world record at the time – was stolen in a daring nighttime robbery from the bank’s main branch in Bab Idriss in Downtown Beirut. The Christian militias blamed the leftist Mourabitoun militia, who they accused of hiring specialists from the Italian mafia to open the safes once they realised that grenades and RPGs wouldn’t do it. No one knows conclusively who carried out the heist and there were rumours that the haul, in true Lebanese fashion, was split between the warring factions.
I arrived in Lebanon in February 1992 and promptly opened an account at BBME. The war had been over for a year. There were still no ATMs and we all had to suffer a pre-war banking system in which every transaction was carried out and signed in triplicate. By September of that year, the Lebanese pound had dropped from 800 to 2,900 to the US dollar. There was a run on LL1,000 notes and I was paid my salary in the now obsolete LL250 notes. There was national pandemonium and cashing a salary cheque, even at a foreign bank, was like trying to get on the last helicopter out of Saigon.
In 2003, on the eve of the invasion of Iraq, a mentally ill man walked into my branch just off Hamra Street claiming to be wearing an explosive vest. The stand-off ended happily, but two years later, the nearby St Georges Bay branch bore the brunt of the bomb that killed Mr Hariri, the MP and former economy minister Basil Fleihan and 19 others, with CCTV capturing the moment the truck bomb detonated its deadly cargo.
By 2010, my local branch was offering courtesy espressos, comfy sofas, the BBC news on flat-screen TVs, copies of Time, Newsweek and National Geographic and a hotline that allowed customers to conduct business with an HSBC employee, in Lebanon, at any time of day.
Now HSBC is folding its tent disappearing into the banking night. It will be missed.
Michael Karam is a freelance writer who lives between Beirut and Brighton.
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