2.2. Banking and Finance

Reform of the banking environment was launched by promulgation of legislation, new law n°23 of 2002, which redefines the role and statute of the Central Bank and creates the Monetary and Credit Council (CMC), in charge of monetary policy and private banking activity. Law n°28 of April 2001 outlines reform of the banking environment and allows for private banking.

Key provisions of the private banking law include: wholly private or joint public-private ownership of private banks; minimum 51 percent Syrian ownership of private banks; minimum capital of SYP1.5 billion (approx. $30 million) for private banks; 10 percent of a private bank’s subscribed capital to be deposited at the Central Bank as reserves. There is a 25 percent income tax on net profits for all banking operations and private banks are banned from engaging in commercial, industrial, and service activities unrelated to banking.

Other recent measures such as authorisation to open a bank account in foreign currency, the possibility of transferring foreign currency, and falling interest rates on the money market reflect Syria’s commitment to adopting forward-looking monetary and financial policy.

Syria’s government-controlled banking system is made up of the Central Bank of Syria and five specialized banks: the Commercial Bank of Syria, the Agricultural Cooperative Bank, the Industrial Bank, the Real Estate Bank, and the People’s Credit Bank. The Commercial Bank had a monopoly on international transactions until 2004, holding foreign exchange deposits outside Syria and providing commercial banking services (including letters of credit), while other banks were more or less limited to savings and checking accounts and lending for non-commercial purposes.

New private banks entered the market since 2004, in particular the subsidiaries of banks in neighbouring countries, which had already been working with the Syrian private sector:

 The BEMO-Saudi-Fransi bank is a joint-venture between Banque Européenne pour le Moyen-Orient (BEMO) of Lebanon and Banque Saudi Fransi, an affiliate of France’s Crédit Agricole.-Banque de Syrie et d’Outre Mer (BSOM), whose main shareholder will be Lebanon’s Banque du Liban et d’Outre Mer (BLOM) in partnership with the International Finance Corporation.

 Bank AUDI whose leading shareholder are the Lebanese Bank Audi, Audi Saradar Investment Bank and Lebanon Invest, Sheikh Abdallah El Rahji;

 The Arab Bank Syria with 49 percent shares by the Arab Bank which takes Jordan as a headquarters;

 Bank Byblos Syria: the Lebanese Byblos and the OPEC fund for international development;

 Fransabank (Lebanese), due to begin operations in 2006.

Furthermore, a 2005 decree authorises Islamic banks to operate in the market, as long as they have minimum capital of 5 billion SYP ($100 million) instead of 1.5 billion SYP for other banks. Three Islamic banks should be starting up operations by the end of 2006: Al Shall (Kuwait), Dallah Al Baraka (Saudi) and Qatar International Islamic Bank. The opening of the financial sector has improved confidence of economic operators and stimulated competition between banks. Private banks have attracted many new customers and considerable deposits; and public banks, in particular the Trade Bank of Syria started modernising and launching new services to develop electronic transactions (VISA, an electronic payment network, e-banking…).

Prospects for the sector are promising. After only two years of activity, performance at private banks has exceeded projections, with deposits of 100 billion SYP ($2 billion).

A stock exchange commission was set up at the beginning of 2006 to draw up legislation to enable launching of the Damascus Stock Exchange.

The insurance sector, previously monopolised by the Syrian Insurance Company, has now been opened to private investment, with enactment of law n°43 of June 2005 and nine companies have been licensed to start operations. According to the law, companies specialising in life insurance must have minimum capital of $17 million, $14 million for corporate general practitioners. Some private banks have started selling insurance products (bank insurance).

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