The three groups to have received licences from the newly created Finance & Credit Council - which will oversee monetary policy - are Jordan's Housing Bank for Trade & Finance, Banque du Liban et d'Outre Mer (BLOM) of Lebanon, in partnership with the International Finance Corporation, and Lebanon's Banque Europeenne pour le Moyen-Orient (BEMO)with Banque Saudi Fransi. Two other banks are awaiting approval after applying for licences in December last year. They are Arab Bankand an unidentified Bahrain-based bank. Six Lebanese institutions, including BLOMand Fransabank, have already obtained licences to operate in Syrian free zones, but not in the local market (MEED 12:4:03).

Under Law 23 of 2002, which was passed by the People's Assembly in December 2001 and approved by President Asad in March last year, private banks are able to operate in the country 'as private or joint venture companies with shareholdings'. New banks are required to have a minimum subscribed capital of £Syr 1,500 million ($28.5 million) and a foreign ownership maximum threshold of 49 per cent.

Law 23 also set up a regulator for the sector, the Finance & Credit Council, which will be chaired by the governor of the central bank, Hisham Mutawalli. One of the ultimate objectives of the council will be to introduce a floating exchange rate system, as was recently introduced in Egypt. There are at least three exchange rates in use in Syria, including an official rate, a customs rate and a commercial or 'neighbouring countries' rate.

There is considerable interest in the latest developments in the Lebanese banking community, where Syrian customers already account for as much as 10 per cent of current account deposits.

'This is a live test of the laws and regulations they have been drawing up for years, and the important thing is to watch the logistics of implementing these laws closely - how they translate from paper into practice,' says a senior Beirut banker. 'There is extensive interest here in what is a very promising market, both from its proximity and its size.'