BEIRUT Lebanon's Central Bank does not have to act in response to the Arab League's financial sanctions on Syria because Damascus does not have any funds deposited with it, the bank's governor Riad Salameh said on Monday.
"Lebanon's Central Bank does not have any money of the Syrian Central Bank on its books in Lebanon. And the Syrian government has no funds with the central bank of Lebanon," Salameh told LBC Television in an interview.
"Therefore these sanctions will not have an impact, and do not require any initiative from us."
The Arab League announced sanctions against Damascus on Sunday including a halt to all dealings with its central bank and state-owned Commercial Bank of Syria. It also called for a freeze of Syrian government bank assets and a halt to financial dealings and trade agreements with Syria's government.
Lebanon, which has close political and trading ties with Syria, voted against the sanctions and Foreign Minister Adnan Mansour told Reuters it would not implement the measures.
A banking official in Beirut said he expected no immediate impact on Lebanese banks from the sanctions as they have little direct business with Syria's government or central bank, and did not hold Syrian state assets.
"My impression is we are not really going to be affected because we don't have a substantial business as bankers with Syria," Makram Sader, Secretary-General of the Association of Banks in Lebanon, told Reuters.
Sader speaking shortly before Salameh's interview was broadcast, said banks had not yet received instructions from the Central Bank or Finance Ministry related to Sunday's decisions.
Several Lebanese banks have subsidiaries operating in Syria, but bankers say nothing in the Arab League announcement would require them to cease their presence there.
In any case, the Syrian subsidiaries were tiny compared to the operations in Lebanon, Sader said.
"In terms of consolidated balance sheets, our six or seven banks in Syria represent almost 4 to 5 pct of the consolidated balance sheets of the concerned banks," Sader said.
Compared to the entire Lebanese banking sector, the Syrian subsidiaries represented only 2 percent of the total business.
Although he saw little impact from the sanctions announced in Cairo, Sader said Lebanon's economy had already been hard hit by the Syrian unrest.
Transit trade from Lebanon through Syria -- the only country with which it has an open border -- had been affected, investor inflows had fallen, and Lebanon was suffering a balance of payments deficit, he said.
"Economically speaking and financially speaking, we are affected by what is going on in Syria (but) as a banking industry we are not directly affected by the Arab League."
Syria's own economy has been badly hurt by the eight months of unrest, and is predicted to contract up to 6 percent this year. Tourism revenues have dried up, oil exports have been hit, trade has fallen and investment has also collapsed.
(Reporting by Dominic Evans; Editing by Andrew Hay)