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Banking sector reformed

Dovetailing with the momentous economic reform that has been taking place in Syria over the past few years, the Syrian banking sector has witnessed a number of reforms starting with the enactment of Law No 28 in 2001 that, after forty years of state monopoly, established the framework for private banking activity.

Thereafter, Islamic Banking Law No 35 was passed in 2005. Both laws set out the procedures for licensing banks' conditions under which they would operate; and principles of their supervision.

Law 28 and Law 35 were amended in terms of capital requirements and ownership structure, by Law 3 in early 2010. Law 3 raised the minimum capital required to start a private bank to SYP10 billion ($21 million) and SYP15 billion for Islamic banks of which 50% should be paid upon incorporation, while the remaining portion of the capital must be paid within three years of commencing operations.

Law 3 also stipulates that founders of the bank should own at least 25% of the capital upon application for licensing. Non-Syrian shares shall not exceed 49% of the banks share capital (could be increased up to 60% based on Prime Minister's approval). On the other hand, legal entities (Syrian or non-Syrian) shares shall not exceed 60% of the capital (up to 75% if public banks are included) and no natural person can own more than 5% of share capital.

By mid-2010, and in line with the need for financing infrastructure project, Law 56 was issued. This allows for the establishment of investment banks with the minimum capital of SYP50 billion which is to be paid in full before launch of operations. Similar to conventional banks, no natural person can own more than 5% of share capital, while the ceiling for non-financial legal entities was set at 10% and at 25% for financial legal entities.

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