Abstract
The purpose of this study is to examine the potential of Lebanese banks to address the economic challenges posed by COVID-19. These banks faced the disturbances of the 2011 Arab Spring, and these two crises have resulted in similar economic conditions, leading to an assessment of how Lebanese banks are dealing with the pandemic-led challenges. Exploratory analysis revealed the common features in the two events, and confirmatory analysis examined the hypotheses underlying a theoretical framework. Triangulation of qualitative and quantitative data helped to scrutinize the two events. Content analysis of data collected from semi-structured interviews with seven senior banking professionals confirms that the Lebanese banking sector’s experience gained during the Arab Spring is a valuable asset for bankers, the Banque du Liban (BDL), and the government, which can be used to anticipate and deal with the COVID-driven economic crisis. The study finds three key moderating factors: trust deficit, inherited characteristics of the economy, and fiscal and monetary policy. Most of these conditions are permanent in nature and require long-term planning. As this research was conducted before the catastrophe caused by the August 2020 Beirut explosion, no aspects of the financial consequences to the Lebanese banking sector and economy resulting from this immerse shock are included.
Highlights
INTRODUCTIONThe caused dramatic impacts on financial mar- inherited characteristics, trust deficit, and conkets all over the world, and has created an unprec- servative fiscal and monetary policies can magnify edented level of risk, causing investors to suffer the vulnerability of the economies of Arab counsignificant losses in a very short period of time, tries, whose characteristics are largely similar to leading to economies like the US implementing other Less developed economies (LDC). zero-percent interest rates and unlimited quantitative easing (QE), which has further escalated Figure 1 explains the conceptual framework using uncertainty in global financial markets (Zhang & two simple structures to understand the case built Hu, 2020)
The economic threat from COVID-19 has raised the question: Can Lebanese banks rely on the experience learned from the Arab Spring to deal with the COVID-19 crisis? The literature on the Arab Spring provides no information that can help in mapping the two situations, Arab Spring and COVID-19, as there is yet no comparable research on COVID-19
With these with the COVID-19 crises? and Are moderators conditions, fall in oil prices causes a reduction in the Arab Spring and COVID-19 models are in foreign remittances. Most of these conditions aligned? The similarity of the moderators identi- are in the moderate-risk zone (Figure 9), which fied in the Arab Spring model and the COVID-19 requires long-term strategies on the part of govallows hypothesizing that Lebanese banks have ernment to improve the infrastructure and bring the ability to deal with the COVID-19 driven eco- social uplift to the underdeveloped sectors of the nomic crises based on the experience from the economy
Summary
The caused dramatic impacts on financial mar- inherited characteristics, trust deficit, and conkets all over the world, and has created an unprec- servative fiscal and monetary policies can magnify edented level of risk, causing investors to suffer the vulnerability of the economies of Arab counsignificant losses in a very short period of time, tries, whose characteristics are largely similar to leading to economies like the US implementing other LDCs. zero-percent interest rates and unlimited quantitative easing (QE), which has further escalated Figure 1 explains the conceptual framework using uncertainty in global financial markets (Zhang & two simple structures to understand the case built Hu, 2020). The high fund managers during COVID-19 in terms of size level of trust deficit cannot help governments to and strategy have shifted in favor of low-risk op- take strict measures or even call for public suptions, as well as from high coronavirus cases to port. 3) The conservative fiscal and monetary policies factors causing economic crises during the Arab that helped during the Arab Spring are Spring and COVID-19, and what was the status of in place to support combating the COVID-19- Lebanese banks in terms of their potential to deal driven economic challenges
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