After the first World War and under the French mandate, the banking system in Lebanon was dominated by the presence of branches of foreign institutions. These foreign banks focused on the financing of Lebanon's foreign trade, leaving the domestic financing to local banks whose capital was limited and scope of activities restricted to the region of their establishment. They mainly engaged in discounting of short term bills of exchange, provided collateral loans and advances against goods or in the form of current accounts, and engaged in foreign exchange trading. They also accepted deposit.On the other hand, local banks greatly relied on the receipt of deposits offering higher deposit rates of interest. However, a great proportion of funds were retained with foreign banks abroad. Local banks also provided advances in the form of current accounts and discounting of local bills of exchange, and engaged in foreign exchange operations. Discount houses also existed and their main operations revolved around discounting and rediscounting commercial paper which were not accepted by banks. However, unlike local commercial banks, they relied on their own funds to finance their activities. In addition, a large number of money lenders were widely spread granting commercial, agricultural, and consumption loans against high interest rates.
The main foreign banks included four French banks -- the Banque de Syrie et du Liban (the banking department, known as of 1963 as the Societe Nouvelle de Syrie et du Liban), the Crédit Foncier D'Algérie et de Tunisie which was the most important investment bank (currently known as Fransabank), Banque Nationale pour le Commerce et l'Industrie (currently known as the Banque Nationale de Paris Intercontinentale), the Companie Algérienne (currently known as the Banque Libano-Francaise)-- and one Italian bank-- Banco di Roma. Two important domestic commercial banks -- Banque Misr-Syrie-Liban (currently known as Banque Misr-Liban), and Banque Tohmé (liquidated)-- also existed.
Starting with the independence of Lebanon in 1943 and continuing with the establishment of the Banque du Liban in 1964, the banking system in Lebanon prospered. The pronounced difference between foreign and domestic Lebanese banks had been relatively reduced as the former no longer greatly monopolized the foreign financing of Lebanon, contributed to its domestic financing, and began competing for local deposits. In fact, the Lebanese banking system witnessed the entry of 13 foreign banks -- Arab Bank Ltd. (Jordan), British Bank of the Middle East (Great Britain), Rafidain Bank (Iraq), Saudi National Commercial Bank (Saudi Arabia), Algemene Bank Nederland (Netherlands), Chase Manhattan (USA), The First National City Bank (USA), The Eastern Bank Ltd (Great Britain), Jordan National Bank (Jordan), Societe Tunisienne de Banque (Tunisia), Moscow Narodny Bank Ltd. (Great Britain), The Bank of America (USA), Habib Bank Overseas Ltd. (Pakistan)-- and more than 40 Lebanese banks of which the Eastern Commercial Bank (currently known as the Banque de la Mediterrannee), Banque Libanaise pour le Commerce, Banque Sabbagh, Banque G. Trade (currently known as Credit Lyonnais), Banque du Liban et D'Outre Mer, Intra Bank, Federal Bank of Lebanon, Banque Belgo-Libanaise (currently known as Societe General Libano-Europeene de Banques), Banque Saradar, Bank of Beirut and the Arab Countries, Banque Joseph Lati et fils, Beirut Ryad Bank, Banque Pharaon et Chiha, Mebco Bank, Byblos Bank, Credit Libanais, Banque Beyrouth pour Le Commerce, Banque Audi, Bank of Kuwait and the Arab World, Banque Geagea, Banque du Credit populaire, Adcom Bank, Rif Bank, and Beirut Universal Bank.
In the period prior to the establishment of the Banque du Liban, banks operating in Lebanon were classified by the Ministry of Finance into three categories. The above mentioned approved banks whose guarantees were accepted by the Lebanese government, non-approved banks whose guarantees were not accepted, and discount houses. Since 1964, and by virtue of the Code of Money and Credit, a list of banks operating in Lebanon has been issued by BDL in January of every year.
Prior to that year, the Lebanese banking system was characterized by the absence of specific banking regulations and supervision. Banks merely abided by the Code of Commerce which regulated commercial business, with the exception of the Bank Secrecy Law enacted in 1956. Regulations, supervision, and control were only introduced with the enactment of the Code of Money and Credit and the establishment of BDL which was granted regulatory and supervisory authority over the banking system as part of its function to safeguard its soundness.