Crony Capitalism in Lebanon’s Banking Sector

While many consider the Lebanese banking sector as the crown jewel of the national economy, with consolidated assets well over 300% of GDP, there are voices being raised against the banks’ extraordinary influence on monetary, fiscal, and even political policy. Lebanese banks have been quite close to the country’s ruling apparatus, often sustaining clientelistic networks and heavily intervening in monetary and exchange rate policy. Yet evidence-based research on the extent to which Lebanon’s banks are dominated by a crony form of capital is non-existent. This paper aims to fill in this gap, and analyze the impact of elite capture of the banking sector on the efficiency of the country’s financial system.