The Dynamics Between Banking Performance & Economic Stability in Lebanon

The Lebanese banking sector has traditionally been one of the foundation pillars of the economy; however, extraordinary challenges have arisen from sources of macroeconomic volatility and political uncertainty compounded by inherent systemic weaknesses. This study methodologically ranges from hybridization of both qualitative insights with quantitative data. The analysis is based on a survey among the stakeholders in the Lebanese banking sector and triangulated with data from both the Central and commercial banks. The findings indicate that currency devaluation significantly reduces the real value of banking assets, increases credit risk, and raises non-performing loans, therefore undermining profitability and systemic stability. In addition, increasing liquidity pressures, further exposed by declining deposits and increasing capital flight, highlight the fragility in public confidence in the financial system. All these weaknesses have been compounded by the lack of strong regulatory frameworks and the slow introduction of capital controls, creating a feedback loop where economic instability reinforces systemic weaknesses. This study has shown the requirement for consolidated policy interventions that will stabilize exchange rates, reinforce regulatory oversight, and revive depositors' confidence.