Prosecutor freezes assets of 20 Lebanese banks amid crisis

State-run National News Agency reports that Lebanon's financial prosecutor has ordered the assets frozen of 20 local banks and their top executives

BEIRUT -- Lebanon's financial prosecutor Thursday ordered the assets frozen of 20 local banks and their top executives, a decision that comes amid financial turmoil in the Mediterranean country.

The official news agency NNA provided no further details on the decision by Judge Ali Ibrahim, which comes a few days before the Lebanese government is to decide whether it will pay a $1.2 billion Eurobond that matures March 9 or default for the first time in its history.

Following a Cabinet meeting Thursday, Information Minister Manal Abdul-Samad told journalists the government will announce a decision following a meeting Saturday.

Lebanon is undergoing its worst economic and financial crisis in decades with the local currency that had been pegged to the dollar since 1997 losing more than 60% of its value on the black market in recent weeks.

Local banks hold much of the country's $87 billion debt, which is at more than 150% of GDP. They have imposed capital controls on depositors, outraging many who have been protesting for months against the country's ruling elite. Citizens blame the political class for decades of corruption and mismanagement.

Many Lebanese blame the banks for benefiting from the massive debt by lending money to the state at high interest rates, adding to a crisis that has recently worsened.

"The country is passing through very difficult times and we are doing all we can to ease the hardship," Abdul-Samad quoted Prime Minister Hassan Diab as saying during the Cabinet meeting. "We are studying all alternatives, possibilities and scenarios. What is important for us is to rescue the country."

Defaulting on the Eurobond payment could have negative repercussions on the country's already crumbling economy, prompting international rating agencies to further lower the country's ratings. Those in favor of default, however, argue the Central Bank's dwindling foreign reserves that will be used to pay the debt are needed to cover the import of fuel, wheat and medicine in the next months.

Also on Thursday, the Cabinet approved a draft resolution to abolish the country's banking secrecy law.

Decades-old banking secrecy laws turned this tiny country into the region's Switzerland, attracting clients from around the Arab world who prized the anonymity its banks afforded.