The corner stone of a healthy economy is a sound banking sector. Banks multiply money supply and spur economic growth. The greater the proportion of bank deposits to money supply is, the greater the capacity of the banking sector to contribute to economic growth.
Syria, a cash society
In addition to the Central Bank, Syria’s banking sector consists of six government owned specialized banks and 15 private sector owned banks. The government owned banks are: Commercial Bank of Syria, Industrial Bank, Agricultural Cooperative Bank, Real Estate Bank, Saving Bank, and Popular Credit Bank.
A sizeable proportion of Syrians avoids dealing with banks. They see them as risky, bureaucratic, overcrowded, and since interest is at the core of their trade, un-Islamic. As a result, cash is kept under the mattress and saving is invested in real estate, gold, or with unscrupulous investment intermediaries. Consequently, the ratio of bank deposits to money supply is below 40%, making Syria a cash economy. The government should take the lead to transform Syria into a bank economy.
1. Pay salaries in bank accounts
The number of government employees in Syria is 1.25 million and the number of its pensioners is 475,000. The great majority do not have a bank account.
The government should pay the salaries of its employees and pensioners and require medium/large private sector businesses to pay salaries in bank accounts. Challenging? May be. But, through concerted government enforcement, cash awards and media campaigns to promote the benefits of a robust banking system to the country and the individual, habits can change.
For the transformation to a bank economy, a prerequisite is a resilient interbank ATM network with constant availability. For its ~25 million people, Syria needs an ATM network of ~10,000, from the current ~1,000. With a functioning ATM on every street corner, an individual will be able to withdraw small amounts of cash from uncrowded machines as often during the pay cycle as needed, instead of receiving the entire salary once a month.
2. Privatize government owned banks
In Syria’s new market economy, government banks must be privatized. Due to the struggle against the Asad dictatorship (2011-2024), government owned banks have not published financial statement for years. To prepare the banks for privatization, the Central Bank should audit their financial statements so that:
a) Regional head offices, branches, and other assets reflect current market values.
b) Non-performing loans are provided for and removed from the balance sheets to collection agencies.
Hopefully, the gain in (a) will outweigh the loss in (b).
3. Encourage the establishment of Islamic banks
Islamic banking is important in Syria because of the devout nature of the majority of Syrians. To be Shari’a acceptable, capital must generate profit, from trading in goods; rent, from leasing real estate, equipment, or other assets; and dividends or capital gains from owning halal assets.
Under trading, called Murabaha, the difference between the purchase and sale prices of the traded goods represents profit, not interest. While a bank loan has two parties, a lender and a borrower, Murabaha has three parties: A seller, the Islamic bank, and a buyer. Prohibited is trading in alcohol, pork products, tobacco, and weapons. Also, prohibited is forward dealing in currencies and precious metals—the difference between the spot and forward prices of gold, silver, and platinum represents interest.
An Islamic lease is like a fixed-rate conventional lease. For a floating-rate lease to be Islamic, the lessee must retain the right to break the lease without penalty on rate-renewal date.
4. Allow branches of foreign banks and 100%-owned subsidiaries
Foreign banks should be encouraged to establish branches and wholly owned subsidiaries.
To attract foreign investors, the minimum paid-up capital of the new banks should be set at $50 million. Also, foreign investors should be allowed to repatriate their capital at the historical foreign exchange rates used when the investment was originally made and be allowed to transfer annual profits at the prevailing exchange rates at the time of the transfer.
5. Regulate the money changers
Currency exchange and money transfer activities should be regulated. They must be prohibited from soliciting or accepting deposits. Owners must be fit and proper. They must maintain detailed records of daily business transactions. They must adhere strictly to Know Your Customer and Anti-Money Laundering rules.
6. Rejoin the global banking system
Now that international sanctions have been lifted and Syria rejoined the SWIFT communications network, re-establishing correspondent banking relationships with Syria’s trading partners must follow.
The Central Bank must enforce the Basel III regulations vigorously to strengthen bank capital, decrease leverage, and increase liquidity, in addition to Know-Your-Customer (KYC) rules to prevent money laundering and illicit financing.
Above all, bankers must not be permitted to gamble. Dealing rooms must not become casinos. Taking society’s saving is a privilege and a responsibility given by the legislator to commercial banks alone under strict controls.
Principles of banking prudence
In December 1863, H. McCulloch, U.S. Comptroller of the Currency and later Secretary of the Treasury, wrote to all national banks his principles of banking prudence. Here are some of the paragraphs:
Let no loans be made that are not secured beyond a reasonable contingency.
Do nothing to encourage speculation. Give facilities only to legitimate and prudent transactions.
Distribute your loans rather than concentrate them in a few hands. Large loans to a single individual or firm, although sometimes proper and necessary, are generally injudicious, and frequently unsafe. Large borrowers are apt to control the bank.
If you doubt the propriety of discounting an offering, give the bank the benefit of the doubt and decline it.
If you have reasons to distrust the integrity of a customer, close his account. Never deal with a rascal under the impression that you can prevent him from cheating you.
Pay your officers such salaries as will enable them to live comfortably and respectably without stealing; and require of them their entire services. If an officer lives beyond his income, dismiss him; even if his excess of expenditures can be explained consistently with his integrity, still dismiss him. Extravagance, if not a crime, very naturally leads to crime.
The capital of a bank should be reality, not a fiction; and it should be owned by those who have money to lend, and not by borrowers.
Pursue a straightforward, upright, legitimate banking business. ‘Splendid financing’ is not legitimate banking, and ‘splendid financiers’ in banking are generally either humbugs or rascals.
For more on this, please see in this Website:
To Save Commercial Banking from Gamblers, Re-enact Glass-Steagall Act
In early March 2026, Mr. Mohammad Abdul Salam Haykal, Vice President of the Syrian Strategic Forum, requested my good friend of fifty years, Mr. Faisal Al-Qudsi, Dr. Abdel-Hay Al-Sayed, and myself to consider ways to modernize and develop Syria’s banking sector to harmonize with the banking sectors in neighbouring countries and internationally.
The following is a translation into English of the Arabic report, as written by Mr. Al-Qudsi. The translation to Arabic which appears on this Website is an AI translation. It may differ from Mr. Al-Qudsi’s text.
London, 17 March 2026
Mr. Mohammad Abdul Salam Haykal,
Vice President, Syrian Strategic Forum, Damascus, Syrian Arab Republic
Dear Mr. Haikal,
Thank you for the letter dated 25 February 2026. You requested a vision to modernize and develop the banking sector in Syria to harmonize with neighbouring countries and internationally. A committee composed of Forum member Dr. Elie Elhadj, Dr. Abdul-Hay Al-Sayed, and myself produced the paper below, which I attach for your kind consideration.
Sincerely,
Faisal Al-Qudsi
Founding member and member of the Board of Trustees
1. Introduction
The committee wishes to extend its sincerest congratulations to Syrians at home and abroad on the success of their magnificent Revolution. We wish our citizenry durable peace and prosperity in a homeland secure in equal rights and responsibilities for all under the law.
This paper addresses future policy recommendations, not implementation or details. It rests on certain foundations:
1. A free market economy is the way forward, as declared by the Transitional Government. A sound banking sector is the cornerstone for a prosperous economy.
2. Markets must be free from political influence. Constraints under the pretext of “particularities of the Syrian Market” impede the efficient workings of supply and demand, thwarting economic growth.
3. Political intervention in the daily management of government ministries must be avoided. Otherwise, nepotism, favouritism, and corruption will follow, compromising the authority of ministers and weakening state governance.
4. Following the events of 11 September 2001 in the United States, financial transparency laws have gained in recognition globally, though not in Syria. These must be applied in the homeland gradually to match those prevailing internationally and in neighbouring countries like Jordan and Turkey.
5. Most money supply must be deposited in the banking sector. Syria may be described as a cash economy because the ratio of bank deposits to money supply is among the lowest in the world. A cash economy denies the banking sector its function as a multiplier of money supply. It also hinders economic growth, encourages financial crimes, reduces tax revenues, and damages the country’s international reputation. Serious effort must, therefore, be invested to transform Syria into a bank economy.
6. Banking reforms should be enacted deliberately and implemented gradually. Haste may result in societal and financial instability. The bankruptcy of a bank, for example, from a poorly designed legislation could result in enormous damage.
7. A brief description of committee members:
The Syrian expatriate Dr. Elie Elhadj worked in multiple international banks in the United States, London, and the Kingdom of Saudi Arabia for about half a century. The Syrian legal scholar Dr. Abdel-Hay Al-Sayed is a graduate of the Syrian University, Switzerland, and Harvard, and has practiced his profession in Geneva and Damascus for twenty years. The Syrian expatriate Faisal Al-Qudsi is an investment banker who has practiced the profession for more than half a century in America, Dubai, Beirut, London, Kuwait, and Jordan, where he founded financial services and investment companies in emerging Arab countries.
The committee met digitally and in person on three dates. It obtained information from banking sources in Syria and London. The Arabic version of this paper was written by committee member Faisal Al-Qudsi, with contributions from the other members. The English version was translated by Dr. Elie Elhadj.
2. Development and trends in global banking during the first quarter of the century
and best international practices
The Internet, the World Wide Web, smart phones, and global travel, among others, made English the language of international finance, banking, and trade. The outcome has been closer connection among peoples and significant development in banking practices:
1. Bank proprietary application platforms have enabled most customers access to their accounts remotely.
2. As a result, the number of bank branches decreased considerably.
3. Central banks and financial supervisory bodies expanded their control over cross-border money movements. Correspondent banking helps compliance with the rules.
4. Know-your-customer (KYC) rules are closely enforced to prevent money laundering, fraud, and terror financing. Dedicated compliance teams verify customers’ identities and monitor transactions.
5. Credit/debit cards replaced cash in most commercial establishments in many countries, resulting in a significant rise in the proportion of money supply kept with banking systems.
6. Restrictions are imposed on cash amounts carried by international travellers.
7. Controls over currency changing services have been tightened. Tourists must now present a passport or a national identification card plus proof of address before a foreign exchange transaction may be undertaken. Unsupervised money changers impact negatively on the reputation of the banking sector, especially among the regulatory authorities in Europe and the United States.
8. Very large, sometimes catastrophic, financial penalties are imposed on companies and banks for violating financial regulations in Western countries, especially the United States.
9. Financial markets in industrial countries became interconnected, allowing investors to trade securities from home or work using the Internet or a broker. Swiftly transmitted breaking news create immediate market price reaction.
10. International sanctions imposed on countries suffering internal unrest or wars have become more effective in ending human rights violations and trafficking in drugs and banned materials.
11. International human rights standards have been emphasized. For example, no bank may arbitrarily close a customer’s account.
12. Real-time Internet search engines and artificial intelligence enable banks to access up-to-the-minute information about their customers.
13. Central banks in industrial countries coordinate among each other and monitor those amongst their citizens and residents who maintain bank accounts or authorized signatures on bank accounts abroad.
14. Digital currencies are being piloted or explored in many jurisdictions, though, Arab banks are cautious.
3. The banking sector in Syria during the corrupt era of the former regime and
at present
The financial, economic, and banking situation in the homeland today is challenging and painful to watch. Decades of electricity outages and Internet disruptions, coupled with international sanctions caused Syria’s banking sector to be isolated from global banking. At long last, since the beginning of 2025, the Revolution ushered a shining sense of hope and a promising bright era ahead. It encouraged Syrian expatriates to start investing in Syria’s future. With the lifting of sanctions in 2025 and joining the SWIFT interbank communications network, it is now feasible for Syrian banks to restore worldwide correspondent banking relationships and adhere to international banking rules.
In what now follows, is a straightforward, honest review of the facts as we see them at the Central Bank, public sector banks, and private sector banks.
The Central Bank
For more than four decades, the Central Bank’s management, operations, and culture were shaped by a centrally managed economy in a single-party dictatorship experimenting with socialist theories for the benefit of the ruling class. Mismanagement was such that even the reserve requirements, which the banking sector must keep with the Central Bank, were often used to pay the salaries of the security forces, the army, and other government agencies.
The task facing the newly appointed Governor is daunting. He is acutely aware of the extent and complexity of the challenge, particularly with the dearth of qualified senior staff. He inherited an employment roll beyond excessive, with an unknown proportion of political appointees from the old regime, an outdated technological infrastructure, and empty vaults, save for the country’s gold reserves and deposits with Lebanese banks of dubious value and collectability.
Public sector banks
There are five specialized state-owned banks in Syria. Their oversight is shared between the Ministry of Finance and the Central Bank. The largest and oldest is the Commercial Bank of Syria. It is the product of successive rounds of nationalizations and Arabizations of private sector banks ever since socialist ideas afflicted much of the Levant in the 1950s. Private sector banks were successful because of the high caliber of their owners and managers and their work ethic culture. However, with the arrival of managers indoctrinated in socialist single-party dogma, the old values gradually faded away.
When private sector banks were allowed to be formed in 2002, private-sector deposits and business began migrating to the new banks, leaving public sector banks with government ministries, poorly managed nationalized companies, and private-sector businesses of the former regime’s cronies. A thorough independent audit is expected to uncover serious deficiencies in the values of loans and other assets on the books of these banks.
We have learned that Commercial Bank of Syria possesses a rather modern automation platform. We have also learned that the fixed assets of public sector banks are recorded at the historical acquisition cost. It follows that a revaluation today of public sector banks’ fixed assets is likely to realize substantial capital gains. Should these gains materialize, they will bolster the net worth of the banks.
Public sector banks suffer from excess staffing levels. It must be said, however, that most of the men and women in government employment are good honorable citizens who had to earn their living by working for a corrupt dictatorship.
Private banks
Forty years after nationalizing Syria’s private banks, a private sector banking law was promulgated in 2002. It was in line with international standards, but government interference in the daily management of the new banks continued unabated. The minimum paid-up capital of the new banks was set at US$30 million. Although small, it was adequate at the time. Ownership was 51% Syrian, 49% foreign. The law did not allow branches of foreign banks. In 2005, a law for Islamic banks followed. Five years later, banks from Lebanon, Jordan, and the Gulf States entered the market.
The strongest Syrian private banks are those with a financially strong foreign partner with extensive foreign geographical spread. The weakest are those with all-Syrian shareholding, among whom are some of the old regime’s most notorious defenders, with hands soaked in blood. Also, the weakest include financially weak foreign partners, such as Lebanese bank(s) unable to meet their financial obligations.
To varying degrees, Syrian private banks suffer from non-performing loans. A significant proportion of the exposure is to companies and businesses owned by accomplices of the former regime. We believe that while a small number of private banks suffer from negative net worth, others might be in an unstable financial position.
The sanctions imposed on the previous regime compelled Syria’s private sector banks to place foreign-currency deposits with the foreign partners, including in Lebanon. When these became unable to meet their financial obligations, Syria suffered no less than a billion dollars, possibly much more, in exposure to Lebanon. Although, these deposits are not lost, their repayment should not be expected any time soon.
4. Reforms, restructuring of the banking sector, and proposed
new legislations
Good governance principles
Banking reforms cannot be reduced to window dressings, cosmetic rulings, partial solutions, or attractive nationalistic slogans. To ensure good governance, reforms must be fundamental and durable. They must be built on a foundation of transparency and separation of governmental powers.
For the Central Bank to perform its regulatory responsibilities professionally, it must be independent of political interference and pressure from shadowy special interest groups. The previous regime turned the Central Bank into a subservient money printing machine, without asset cover. The result was years of steep price inflation, massive deterioration in the foreign exchange value of the Syrian pound in terms of major currencies, and aggravation of the ills of a cash economy.
Now that the sanctions have been lifted, Syria is ready to rejoin the international business and banking communities. Success during this phase is critical to building confidence in the country’s long-term prospects to meet the long-term economic growth targets of the Administration. A properly reformed banking sector is essential to attracting investments from Syrian expatriates and foreign investors. These are lofty ambitions. We are confident that the ingenuity, commitment, and dexterity of the Syrian individual will combine to bring an era of sustained economic growth.
In this connection, the Almighty has words of inspiration and reassurance in His revealed Book:
“O you who have believed, why do you say what you do not do? It is a great sin in the eyes of Allah that you say what you do not do.”
God Almighty has spoken the truth.
Typically, bankers and lawyers combine words with action. So, let’s begin with recommending reforms starting with the top of the pyramid.
Central Bank of Syria (CBoS)
In the Saudi Arabian experience there is an example to follow. In the mid 1970s, faced with the sudden and huge inflow of oil revenues, Saudi Central Bank (then called Saudi Arabian Monetary Agency) invited international banks to help organize its banking operations and train its staff. In Syria, to transition from a centrally planned socialist economy to a free market system, CBoS ought to seek assistance from friendly central banks to help produce an operating manual for policies, procedures, governance, and risk management. Also, to train staff on implementing international prudential regulations, managing money supply and interest rates, supervising the banking sector, and designing modern automation systems and work methods. We believe that this phase might take around one year.
Assistance may be sought from central banks in friendly Arab countries, such as (alphabetically) Jordan, Kuwait, Qatar, and Saudi Arabia, and Western countries, such as Denmark, Great Britain, Switzerland, and Turkey. It would be helpful if the advising teams are provided as grants, hosted by the CBoS. Assistance may also be sought from the World Bank, the International Monetary Fund, United Nations organization, and United States Treasury Department. Alternatively, an international consulting house may be engaged; though, the fees involved might be rather too high for a recovering Syrian economy.
New legislations to harmonize with international banking
The following legislations need to be enacted in the coming year or so, to regulate the following:
1.Theestablishment of new banks. A new banking law requiring a minimum paid-up capital of US$200 million should allow Arab and foreign investors to own up to 100% of the paid-up capital of the new banks. Also, the new law should open the door to branches and subsidiaries of foreign banks. The number of banking licenses should be left to the Central Bank to determine.
Dr. Elie Elhadj believes that, to attract foreign investors, the minimum paid-up bank capital should be set at US$50 million. He also believes that foreign shareholders should be allowed to repatriate their foreign currency investments at the same rate(s) of exchange used when the original investment was made. As for repatriating annual profits, these would be transferred at the market rates prevailing at the time the transfer.
2. Money, credit, and Central Bank governance.
3. Islamic banking.
4. Anti-money laundering.
5. Investment and brokerage services, with a minimum paid-up capital of the equivalent of US$10 million and a high foreign participation.
6. Currency exchange, with adequate paid-up capital and explicit prohibition on seeking or accepting customers deposits.
7. Stock markets and securities exchanges, consistent with international standards on transparency, insider trading, including board members.
8. To diminish the size of the cash economy, employees of the government and private sector businesses should be required to receive their salaries in bank accounts.
Managing distressed, impaired, and bad loans
Typically, correspondent banks avoid, let alone extend lines of credit to banks with unreliable or weak balance sheets. It is with urgency, therefore, that all non-performing assets on bank balance sheets must be rectified as soon as possible.
A thorough audit led by the Central Bank should determine the amounts of the losses in every bank, public sector and private sector. Loss provisions should be booked in the profit and loss account(s), with the subject assets removed from the balance sheet(s), including any collateral, and transferred to debt collection agencies.
Public sector banks
After removing all non-performing assets from the balance sheet(s), public sector banks should be privatized. To contain expenses, we propose merging the five public sector banks into the Commercial Bank of Syria, or into an additional bank.
Before the process of privatization begins, the fixed assets of each bank should be revalued. We learned that these are kept on the bank(s) balance sheet(s) at the original historical acquisition cost. Thus, a serious appreciation in these assets may be expected. If so, the losses from the non-performing portfolios might be ameliorated, hopefully, even eliminated.
For purposes of this paper, we put forward the idea of selling these institutions at the highest possible price to Syrian investors only, to protect the rights of the State Treasury and provide a fair compensation to bank employees whose jobs may be terminated.
Dr. Elie Elhadj believes that privatization offerings should not be limited to Syrians alone. They should be open to foreign investors as well, to encourage investing in the country.
Private sector banks
After removing all non-performing assets from the balance sheets of private sector banks, possibly within around one year, negative-capital bank(s) should merge with the strongest balance sheet bank.
Where the foreign partner is strong and financially able to increase the capital of its Syrian subsidiary in line with the new banking law, they would maintain the existing status.
The remaining private banks may be divided into two groups and merge with either of two solvent banks.
It is expected that under the proposed banking law, participation by private sector Syrian investors would be less than before.
A summary of the conditions to reintegrate Syria’s banking system into global banking
Before it may be integrated into the global banking, Syria is expected to meet the following requirements:
Solvency of the banking sector, institutionalizing compliance with internationally recognized regulatory frameworks, including anti-money-laundering, counter-terrorism financing, international sanctions (where applicable), and due-diligence requirements.
Harmful government actions to the banking sector
The government has recently seized assets held as collateral for loans made by public and private sector banks to businessmen affiliated with the defunct regime. It is neither fair nor equitable to impair the banks’ security.
The government should either return the collaterals to the banks to liquidate, or guarantee repayment of the loans to the banks.
A serious lack of transparency in certain government entities
Ambiguity surrounds Sham Cash, the platform that pays salaries to some state employees. The source of this entity’s funding is unknown. Also, suffering from a lack of transparency are the Sovereign Fund, and the Development Fund.
5. Conclusion
The prosperity of the Syrian economy in the 1940s and 1950s was due primarily to the robustness of the private sector. This was rooted in the Syrian individual’s love of work as if work were a sacrosanct act of worship. In this context, we recall two stories:
A former Prime Minister of Malaysia wrote his Ph.D. dissertation at a British university in the early 1950s on the economies of emerging and recently independent countries. Syria was the case study of his research. He spent in our country three month and interviewed scores of officials before successfully defending his dissertation. This experience must have contributed to his vision and decisions in building the prosperous economy that is Malaysia today.
The second was in 1959. The late Gamal Abdel Nasser, former President of Syria and Egypt, ordered the Central Bank of Syria to transfer the gold reserves in its vaults to the Central Bank of Egypt. The Governor of the Central Bank at the time, the late Izzat al-Tarabulsi, publicly refused. President Nasser criticized him in one of his speeches. The Governor resigned. The gold remained at the Central Bank and Mr. al-Tarabulsi remained immortal in the collective memory of Syrians.
In both cases there is a lesson for the Syrian people and their political leaders to learn and be proud of.