📰 Syrian Central Bank’s Controversial Directive: Forcing Banks to Absorb $1.6 Billion in Losses from Lebanon’s Financial Meltdown

In a move that has sent shockwaves through syria/" class="auto-internal-link">syria’s already fragile financial sector, the Central Bank of Syria issued a directive on 22 September 2025, compelling commercial banks to fully provision for losses tied to Lebanon’s ongoing financial collapse. The directive, leaked to the public via a Reuters report on 21 October, orders syrian/" class="auto-internal-link">syrian banks to reclassify their frozen deposits in Lebanon—totalling over $1. 6 billion—from balance sheet “assets” to outright “losses”. Banks have been given six months to submit restructuring plans or raise fresh capital to cover the impairment. Institutions that fail to comply face the threat of regulatory sanctions, including forced liquidation or bankruptcy. This development arrives at a perilous moment for the Syrian economy, which remains burdened by the legacy of civil war, crippling international sanctions, and a latest political transition following the fall of the Assad regime.

Additionally, with total assets of Syria’s private banking sector valued at roughly $4. 9 billion, the exposure to Lebanon represents more than one-third of the sector’s worth—underscoring the profound financial interdependence between the two neighbours. Historical Context: A Long-Standing Economic Symbiosis The roots of this crisis lie in the entwined economic histories of Syria and Lebanon. For decades, Lebanon functioned as Syria’s “external financial pocket”, offering a route around Western sanctions and acting as a haven for Syrian capital. Under the Assad regime, Syrian banks channelled billions into Lebanese institutions, drawn by access to dollar liquidity and relative financial stability. This dynamic deepened during Syria’s civil war (2011–2024), as Syrian financial institutions lost direct access to global systems.

Lebanese banks became an indispensable conduit for trade, remittances, and capital storage. By some estimates, Syrian holdings in Lebanese banks reached as much as $30 billion by 2019. Much of this was held informally, complicating efforts to quantify the full extent of exposure. However, Lebanon’s own financial collapse—sparked in late 2019 by unsustainable debt levels, corruption, and a central bank-fuelled Ponzi-like scheme—upended this arrangement. The collapse resulted in a sovereign default, stringent capital controls, and the freezing of deposits. Syrian funds, numerous denominated in US dollars, were either trapped or forcibly converted into Lebanese pounds at deeply unfavourable rates—a process dubbed “lirafication”.

The repercussions for Syria were immediate and severe. Lebanese capital controls triggered liquidity shortages inside Syria, fuelling inflation and accelerating the devaluation of the Syrian pound. Businesses dependent on cross-border operations faced collapse, while poverty deepened in a country already reeling from…