Beirut, Lebanon - Lebanon's banks further tightened limits on foreign currency withdrawals on Monday, with at least one financial institution restricting depositors to a maximum withdrawal of $400 a month.

Curbs on withdrawals and other unofficial capital controls were first implemented in November following bank closures in response to nationwide protests against corruption, political sclerosis and the government's mismanagement of the economy.

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The country's economic crisis has only deepened since then, as confidence in the banking system founders, businesses close shop or cut back production and workers' hours, and tens of thousands are left jobless.

Banks are on the front lines of the fight to halt so-called "capital flight" characterised by an exodus of foreign currency reserves as people seek to shield their savings from rampant inflation and potential economic collapse.

Since 1997, the country's currency has been officially pegged to the United States dollar with 1,500 Lebanese pounds buying one greenback. But on parallel exchanges, the Lebanese pound lost more than 60 percent of its value against the dollar this month due to an acute US dollar shortage in the country. The pound is currently trading on the parallel market at a roughly 33 percent discount to the official rate.

Inflows of foreign currency from Lebanon's large diaspora have been drying up since this summer as the country grabbles with an economic crisis rooted in many factors including corruption, the civil war next door in Syria, government failure to enact much-needed reforms, and an antiquated power sector that sucks billions from state coffers.

Adding to the urgency to shore up foreign currency reserves: Lebanon has a $1.2bn Eurobond repayment due in March, raising the spectre of a debt restructuring or possible bailout from the International Monetary Fund to avoid default.

"Resources are limited. Unless we see big new flows, unless, for example, we have the International Monetary Fund come in with a programme and send billions, we are going to be less able to pay in dollars," a high-level banker told Al Jazeera, speaking on condition of anonymity.

Describing restrictions on dollar withdrawals as "not legal" the banker said they were necessary to "protect the system".

Banks have long been seen as a pillar of stability in Lebanon and have played a main role in bringing in foreign currency to be used to finance Lebanon's burgeoning debt - the third-highest in the world as a percentage of gross domestic product, which measures the value of all goods and services produced across and economy.

The banks closed for two weeks in October at the outset of an unprecedented nationwide uprising that brought down the cabinet of former Prime Minister Saad Hariri. When they reopened, they had instituted informal capital controls that initially set weekly withdrawal limits at around $1,000. But banks quickly lowered withdrawals to just a few hundred dollars per week.

On Monday, a notice from Bank Audi, one of the top three Lebanese banks, said depositors could withdraw dollars just twice a month, at an amount based on the size of the depositor's account.

BLOM Bank, another top financial institution, limited depositers to withdrawing only $200 every two weeks for accounts under $10,000; $300 for accounts under $100,000; $400 for accounts under $500,000; $750 for counts under $1m and $1,500 for accounts topping $1m.

Credit Libanais set limits of $200 per week with a maximum of $600 per month.

Last week, banks announced they would ease some controls on domestic currency by allowing withdrawals of up to 25 million Lebanese pounds per month ($16,545) based on the size of the bank account.

Dan Azzi, the former chairman and CEO of Standard Chartered Bank and a financial commentator, told Al Jazeera that the latest measures, taken together, were in effect a move towards "less and less dollars and more and more lira".

The so-called "lirafication" comes with drawbacks for depositors. Many Lebanese are being forced to convert dollar-denominated savings into Lebanese pounds at the official exchange rate in order to withdraw the funds. Given that the prevailing black market exchange rate values the pound at less than the official rate, such withdrawals imply a de facto loss or "haircut".

It is likely that strict limits on transfers abroad and cash withdrawals in Lebanon will continue for a period of "minimum one and a half years and maximum five years if the government starts doing the right things now," said the high-level banker.

Withdrawal restrictions have led to chaotic scenes at banks as depositors demand to be paid in dollars - something that was previously the norm in a country where the local currency and dollars were used interchangeably.

Angry rioters have attacked dozens of banks over the past couple of months, smashing glass vitrines, breaking ATMs and in some cases even setting fires.

The high-level banker said that politicians had refused to pass capital control legislation at the outset of the Lebanese uprising, preferring to push the burden onto banks.

"We pleaded with all concerned parties, but they said they won't intervene, so they put us in front of our customers," he said. "In the rest of the world, it was either parliament or the central bank or the government who did those measures. Here, we had to protect the depositors and the economy so not all the money goes out. We had to put the controls ourselves, which is not legal. But we did it ourselves to protect the system."

Legal challenges have already started to mount against such measures, with several judges across Lebanon enforcing the rights of depositors to access their funds unencumbered.

Legal Agenda, a Lebanese nongovernmental organisation, announced on Monday that it is preparing to bring both criminal and class-action lawsuits against banks over informal capital controls.

Nizar Saghieh, the group's director, said that the imposition of informal capital controls in lieu of government-spearheaded action is the "clearest example of the public authorities' neglect for protecting the rights of citizens," adding that the group is also ready to challenge any formalised controls imposed by Lebanon's central bank.

The senior banker told Al Jazeera that he does think the central bank will implement such controls, albeit under a different name. "I think one of the first things the new government will do is allow the central bank to issue a circular to 'regulate transfers,'' he said. "They won't call it 'capital controls.'"