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Establishment
Procedure
/ Release of the Blocked Amounts / Sources
of Funds / Restrictions 6. Credit Restrictions The foreign financial institution¡¯s branch abides, as necessary, by the general rules stated in the Code of Money and Credit regarding credit granting, and by the special measures that might be taken by the Bank of Lebanon regarding the activities of the financial institutions. A. General provisions 1. The foreign financial institution¡¯s branch should take into consideration, when using the funds received from banks and other financial institutions, the rules that protect its creditors¡¯ rights. Specifically, it has to reconcile between the term of investment and the nature of itsa sources. 2. The branch should require from any credit applicant to submit a statement of his fianancial position or a balance sheet. 3. The branch should follow up the use of the credit granted to make sure that its use did not deviate from the stated purpose. 4. The branch is prohibited from binding the collateral received to any obligation or credit without obtaining the prior approval of the debtor by a special contract. It is also forbidden to bind such a collateral to any obligation or credit by an amount exceeding the value of the loan due from the debtor. 5. The branch is prohibited from buying back the shares of the mother foreign financial institution and from accepting them as a collateral against loans it grants. B. Special provisions for credit against pledged securities The foreign financial institution¡¯s branch is forbidden from granting its clients credits earmarked for the formation of a portfolio of securities, unless the portfolio is pledged and the securities in question are marketable in the Lebanese financial markets. The credit granted should not exceed 50% of the value of securities forming the portfolio as determined by the closing rates in the financial markets on the date the credit was extended. The above ratio can be exceeded by accepting the pledging of foreign marketable securities at 50% of their market value. If the decrease in the portfolio¡¯s market value reaches 25% of its initial value, the client must cover the decrease immediately, otherwise the financial institution must liquidate the part of the portfolio necessary for maintaining the balance of credit within the 50% limit of the portfolio¡¯s value. If the securities are withdrawn from the financial market, the client is requested to repay the value of the credit immediately. It is prohibited to grant credit to clients for the purpose of subscribing to shares of companies under establishment or paying for these shares.
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