On the readiness to adopt digital financial services and the importance of the availability of cash during the recovery
How might changes in the sanctions environment affect Syrian banks’ ability to finance foreign trade?
HOSSAM HALLAQ: For many years, Syrian banks have faced significant obstacles in financing foreign trade, largely due to long-standing sanctions. Only a limited number of banks have managed to work around these constraints, mainly those that could access foreign currency through international organisations and use it to support trade finance. Most banks, however, have struggled to establish or maintain correspondent relationships, and as a result, many trade-related transactions have moved outside formal banking channels.
The core issue today is not technical connectivity – Syrian banks are now reconnected to systems like SWIFT – but rather the reluctance of foreign correspondents to engage fully. Banks abroad continue to request extensive documentation and remain hesitant until there is more clarity and comfort around the sanctions framework. A durable and clearly defined easing or lifting of Caesar Act-related restrictions is likely to be a key factor in rebuilding correspondent banking ties and restoring more normal trade finance activity.
To what extent is the sector ready to expand digital services, and what conditions would accelerate progress in adopting modern technologies?
HALLAQ: There is genuine openness among customers – both younger and older generations – to using digital and mobile banking tools. The challenge is less about willingness and more about the underlying environment. As long as the cash shortage persists and merchants continue to require physical cash for most transactions, digital payment tools cannot deliver their full value. To make digital banking effective, banks would first need to see improvements in cash availability and a reduction in restrictions on transfers and currency conversion. Once these constraints are eased, the sector could progress step-by-step towards wider use of electronic payment tools and modern digital services.
What is your assessment of the liquidity landscape in the banking sector, and what factors are shaping recent developments in the availability of cash?
HALLAQ: The Syrian banking sector has been dealing with a persistent shortage of cash for several years. This is not a new development, but a structural issue that has become more pronounced recently. It’s important to distinguish between liquidity in the form of cash bank-notes and liquidity as account balances. What banks are struggling with today is primarily the availability of physical cash. Even when customers’ balances exist on paper, converting those balances into usable banknotes is difficult. This cash-based liquidity constraint continues to shape day-to-day banking operations.
Which priority steps could support the sector’s recovery in the near term, and how do you envision the role of Syrian banks evolving?
HALLAQ: Several steps are needed to support recovery. First, there has to be a clear and accurate understanding of banks’ current financial positions, especially given that balance-sheet data may not fully reflect underlying risks. The Central Bank has taken a meaningful step by addressing exposures to Lebanese banks and requiring appropriate provisioning. Strengthening bank capital to meet Basel III standards is also a crucial step.
Beyond that, reviewing and easing some regulatory constraints on lending and banking operations, as well as investing in training and re-qualifying staff, will be key – especially since the sector has been isolated from global developments for more than a decade. Re-establishing relationships with international banks will also be essential. Once sanctions are eased and correspondent banks regain confidence, Syrian lenders should be able to reconnect with global financial networks. This, combined with broader economic recovery and progress in infrastructure and reconstruction, would allow the sector to play a fuller role in supporting trade, investment and overall economic activity in the coming years.
Read More from OBG
