The Central Bank Of Lebanon Case Study

The Lebanese culture, being similar to the culture of the MENA countries, along with the lack of legal requirements for companies, have made the corporate governance in Lebanon less efficient than other countries. In order to improve it, the government has set in the recent period new requirements for the companies operating in Lebanon, related to the composition of the board of directors’ committees. In 2008, the Central Bank of Lebanon issued the circular no. 118, requesting mandatorily from all banks to establish an audit committee in their board of directors with clear measures regarding the size of the committee, the frequency of meetings, the financial expertise of its members, etc. This decision had positive impact on the banks’ corporate governance in many terms. It helped improving the internal audit work especially in the Anti Money Laundering function. The new decision also made the audit committee able to evaluate the external auditors’ independence. However, these requirements are still lacking important protection codes (Salloum, 2014). According to Bakkour & Chehaita (2011), 14% of the companies operating in Lebanon have audit committees, with only 18% of these committees operating efficiently.
Many efforts were also done by the Lebanese Government to apply the …show more content…
First, new foreign investments were announced in Lebanon, the companies involved are mandatorily required by the parent company to be audited, especially when owned by European countries. Second, investors and creditors became more interested in the credibility of the financial statements, thus requesting audited information before taking their decision. Third, several companies voluntarily choose to be audited, whether to improve the accounting quality or to benefit from the positive perception of the market for audited financial statements. These reasons are explained in details in the next