Lebanon / History: the crash of the Intra Bank
First bank in Lebanon and considered important bank in the world due to its holdings in its crash in 1966, the Intra Bank was founded in 1951 by Youssef Beidas, of Palestinian origin by his father and by Lebanese his mother and naturalized Lebanese.
even before the founding of the Intra Bank, Yousef Beidas, including the value of money transfers, establish a currency exchange, International Traders, using Intra telex name. Among the customers of this establishment, several wealthy men who will be among the shareholders of the Bank including its three main partners, Mounir Abou Fadel, vice president of the Lebanese Parliament, Emile Mousallam and Mounir Haddad.
Intra Bank, a success related to banking secrecy and oil money
This will primarily benefit from the establishment of banking secrecy in Lebanon, but also of oil wealth following the exploitation of hydrocarbon resources of Arab countries and allow financial transfers with the Lebanese diaspora or coups and political instability by which many countries passed.
Thus, the Bank quickly open branches abroad, such as Europe and France in particular, in different countries of the Middle East or the Americas North and South.
It will own during its bankruptcy, up to 17% of total deposits in Lebanon (it existed at the time many foreign financial institutions operating through subsidiaries in the Land of the Cedars), 38% of the deposits of Lebanese banks and 60% local banking activities were carried out by this institution.
The Site of the Ciota, property of the Intra Bank in the 60s and 70s.
It will be recalled for example that the Intra Bank owned the shipyard CIOTA in France, and significant shares in many other companies, including the Casino du Liban, which was inaugurated in 1959, Middle East Airlines (MEA) or the Port of Beirut.
Among other things, a skyscraper of 27 floors in the 5th Avenue in New York, or land located near the Champs Elysees, which will be sold in the 1980s.
Participating in the Lebanese economy, Yousef Beidas will also introduce the company Studio Baalbek still in the 50s.
This success, however, begin with worry Lebanese and foreign authorities.
On 14 October 1966 the Intra Bank suffer from a lack of liquidity which led him to cease its payments.
In case, the refusal of the Lebanese Central Bank established in 1964 to provide this liquidity.
Many accuse the Lebanese political authorities of being behind this refusal because of their concern about the growing influence of a man of Palestinian origin on the local economy and infrastructure, through MEA or the port of Beirut.
Yousef Beidas would include funded, there are rumors that an important part of the PLO, which is then placed as the military wing of the Palestinian resistance to Israeli occupation. These concerns had already been expressed by the President Fouad Chehab.
The Lebanese authorities were not the only ones concerned about this influence. Saudi Arabia had also expressed concern because of the secular and nationalist causes that the businessman maintained. His property also was a refuge for opponents of capital regimes in Arab countries, whether opponents Syrians, Egyptians, or nationals of countries of the Arabian Peninsula.
The main entrance of the Bank of Lebanon (BDL) Photo Credit: Libnanews.com, all rights reserved
However, it was under his successor Charles Helou that begin the difficulties of Intra Bank after the refusal of the Central Bank approved a loan to the facility for $ 30 million.
The Lebanese authorities will file with Interpol an international arrest warrant against the man of business while the latter was trying to get loans to replenish his bank.
He was then in Brazil with his wife and 3 children.
Sentenced in absentia to seven years hard labor for fraudulent bankruptcy, Yousef Beidas will however be placed by the Brazilian authorities under surveillance at home. He would pretend to be the victim of a heart attack.
However, it is two years later in 1968 that Youssef Beidas will die of pancreatic cancer in Switzerland. Some will find his death as suspicious.
Seismic financial consequences of the bankruptcy of Intra on Lebanon and the Middle East
The consequences of the bankruptcy of the Intra Bank will be seismic in the Middle East and affect particularly Lebanon, which will see its banking system, previously considered reliable, being discredited.
In lack of liquidity, the institution was nevertheless rich in real estate. However, she was faced with significant losses amid speculation precious materials or on the dollars.
Thus, on the eve of its bankruptcy, Yousef Beidas have lost nearly 70 million by betting against the US dollar as the US authorities had taken measures to control inflation.
Furthermore, also on 9 October 1966 Saudi Arabia had decided that the withdrawal of funds was placed.
He had also told regulators that it will guarantee the losses through its private funds.
Besides a political vendetta, many irregularities revealed during the investigation
The investigation will begin reveals other irregularities including significant loans to directors of the bank or the payment of dividends of yet unprofitable subsidiaries. The bank funds have also been used to guarantee personal loans to Yousef Beidas, with foreign institutions.
Originally also the lack of liquidity, the fact that only 5% of deposits have liquid against a regulation requiring 25% of deposits to be liquid at the time. This gave an advantage to the bank and had more money to invest but with the disadvantage of being exposed to a liquidity crisis.
The crash of the Intra Bank will cause many conspiracy theories. Thus some accuse the establishment of laundering money linked to the Corsican mafia basis of information provided by the FBI, or to drug trafficking of the famous “French connection”.
However, because of its holdings, the bank will remain crucial for the Lebanese economy. A rescue plan will be quickly implemented. It will be the bank’s break-up into several entities together under the Intra Investment Group to be the recipient of the main shareholdings of the defunct bank.
At present, the Central Bank holds 28% shares of this new company, followed by the Kuwaiti government, which holds 19%, the Lebanese government holding 10%, the Central Bank of Kuwait (4%) and the Government of Qatar (3%).
We are talking to the Lebanese government to sell its shares and those of the BDL to reduce its public deficit. There is also talk of privatizing MEA companies or that of the Casino du Liban which are now directly held by the BDL following a restructuring of the assets of Intra.