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Syrian banking continues on its path of modernization

Syrian banking continues on its path of modernization - Central bank plans to unify foreign exchange rates

The Central Bank of Syria is working toward unifying the two foreign exchange rates for the Syrian pound and upgrading its exchange operations as part of the Syrian authorities’ plans for modernizing its socialist economy, the bank’s governor said Monday.

“The goal of unifying the exchange rate is not far away,” Mohammed Bashar Kabbara said in a lecture held in Beirut on the future of Syrian banking. “We have to settle on a single foreign exchange rate that can remain fixed and sustain itself after we liberalize more exchange operations.”

Currently Syria has two exchange rates, one fixed rate for public sector operations, and a flexible rate for private sector operations. Previously Syria had up to 14 exchange rates that were unified a few years ago to facilitate banking transactions.

The Central Bank of Syria is currently busy upgrading the country’s outmoded banking sector, which opened itself up to private banks in 2004 for the first time in 40 years. Two of these banks were Lebanese. “2004 is the year of great transformations in the banking industry in Syria,” said Kabbara.

He added that the central bank will soon finalize tender specifications to bring in a company to install an electronic exchange system. “An international expert has added the final touches to the tender specifications and we will announce it in the near future,” said Kabbara, who met with Prime Minister Rafik Hariri on his one-day visit to Beirut.

Lebanese banks BLOM and BEMO started operating in Syria this month in partnership with Syrian and foreign investors, after they were granted licenses last year. Syria nationalized its banks in 1963 after the socialist Baath Party came to power.

Before the arrival of private banks, the banking sector in Syria was restricted to state-run banks, each specialized in a certain sector. “Two banks have opened in Syria, a third will open in the next few days and licenses will be granted to many more banks,” said Kabbara.

Both of the Lebanese banks operating in Syria are owned by bankers of Syrian origin: BLOM by the Azharis and BEMO by the Obegi’s.

BLOM’s bank in Syria, Bank of Syria and Overseas (or Banque due Syrie et d’Outre Mer), was the first to open.

BLOM owns 39 percent of the Syrian bank’s shares, the International Finance Cooperation has 10 percent and the rest are held by prominent Syrian investors such as Rateb al-Shallah ­ President of the Federation of Syrian Chambers of Commerce. BEMO has teamed up with the Saudi Arabia’s Al-Bank al-Saudi al-Fransi to open in Syria.

Under the new Syrian banking law, foreign banks wishing to operate there, must be 51 percent owned by Syrians and have minimum paid up capital of $30 million.

Syrian authorities are trying to change some of the monetary and banking laws to facilitate the work of private and public banks. The Syria Money and Credit authority issued a decree in January allowing banks to borrow from each other for the first time at an inter-bank rate not exceeding 4.5 percent. Last year it lowered interest rates on deposits and loans for the first time in 22 years.

Beirut,01 26 2004
Dania Saadi
The Daily Star
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