2010-09-11 English Arabic

 

The Central Bank .of Libya has, during the period 2001-2006, taken several steps related to monetary policy aimed at achieving general price level stability and maintain the banking system soundness in consistence with the bank's objectives and mechanisms of achieving these objectives in accordance with the law provisions.

          The Executive position of the monetary policy, during the mentioned period, might be summarized in the following points:-

1.     Considering the important role of the monetary policy in exerting the appropriate changes on the macroeconomic level, that starts from the data and information available for the monetary sector and studying its different impacts on the economic activity, the Resolution no. (32) of the year 2005 of the Governor of the Central Bank of Libya has been issued in April 7th 2005 to establish a monetary policy committee in the Central Bank, including in its membership some officers of the bank and other outsider specialists in order to set the general framework for the monetary policy in a way that guarantees the objectives achievements and studying all issues related to the monetary and banking policy and their impacts on the economic activity and sending its recommendations to the board of directors to take the appropriate actions.

2.     In accordance with the Resolution no.(49) of the board of directors of the Central Bank of Libya issued in December 24th 2001, the equivalent value of Libyan Dinar against foreign currencies was determined on the basis of one Libyan Dinar for 0.608 unit of the Special Drawing Rights (SDRS). According to the Resolution no. (17) issued in June 14th 2003, the percentage of 15% applicable to the utilizations of the exchange rates related to foreign transfers and credits to finance The Great Man Made River was incorporated making One Libyan Dinar equals 0.5175 unit of the SDRS . This exchange rate is Fixed and against this unit, but it is changing against other foreign currencies with the same amount with which these currencies are changing against the unit of the SDRS .
After more than (5) years of operating with this currently used exchange rate, it is clear that this rate is quite appropriate in this time period for the Libyan economic conditions, as is confirmed by the report of the Consultations Mission of the International Monetary Fund that visited Libya in December 2005. The report that has been discussed by the Executive Board of the Fund in March 17th, 2006.

3.     Emphasizing the commitment to apply the monetary reserves and the legal liquidity ratios required by the law provisions and the instructions of the board of directors of the Central Bank of Libya.

4.     The board of directors of the Central Bank of Libya has taken several resolutions , in which it reconsidered some of the utilizations and rates of monetary policy tools that have been applied prior to the year 2004, including the following:

-        Resolution no. (8) of the year 2004 related to cutting down the rediscount rate applied by the Central Bank of Libya from 5.0% to 4.0%.

-      Resolution no. (16) of the year 2004 related to cutting down the minimum interest rate on loans and credits granted for productive  purposes from 7.0% to 3.0%.

-       Resolution no. (28) of the year 2004 related to the permission to the commercial banks for granting loans and credits for the foreign companies executing projects in Libya.

-       Resolution no.(15) of the year 2005 related to cutting down the interest rate given by the Central Bank of Libya on the commercial banks deposits with the bank from 2.5% to 1.75%, in order to motivate them to seek other domestic investment and finance areas that help in achieving the desired economic growth.

-        Resolution no.(36) of the year 2005 related to the liberalization of the interest rates on deposits, letting the negotiations over these rates to the bank and his customers.

-      Resolution no.(39) of the year 2005 concerning the uniformity of debited interest rates on all loans and credits granted by the commercial banks to be equivalent to the rediscount rate of the Central Bank of Libya plus a percentage not exceeding 2.5%.

-       The resolution no.(45) of the year 2006 regarding the determination of the maximum limit of the ownership of shares of a commercial bank with 5% of the capital relative to the total possessions of the individual, its antecessors and successors of the fourth degree. The ownership of the legal entity should not exceed 10% of all its possessions. The ownership of legal entities, public and/or private, in the capital of any one commercial bank should not exceed 20% of the total capital of the bank. These ratios are not applicable to the ownership structure of the capital of the banks when this resolution was issued.

-      The resolution no.(47) of the year 2006 regarding the revision of the fundamentals and criteria of classification of debts of the commercial banks and the required provisions for these debts.

-        The resolution no.(48) of the year 2006 regarding raising the credit ceiling granted by commercial banks to be not more than the total cash and non-cash credit and loans granted by the bank for any one case of 20% of the total capital and non-apportioned reserves.

-        The resolution no.(49) of the year 2006 regarding giving the regional banks a last chance to complete their capitals or addressing their situations by merging together within a the deadline March 31, 2007.

-       The resolution no.(54) of the year 2006 regarding the determination of the maturity of real-estate loans granted for construction or acquisition of complete house with no less than twenty-five years and no more than sixty years.

-         The resolution no.(56) of the year 2006 regarding the approval of the results of the study prepared about the strategy of foreign banks entry to the Libyan banking market and the restructuring of both the banking and the financial sectors.

-       The resolution no.(57) of the year 2006 regarding the authorization of the boards of directors the commercial banks to take decisions related to bank branches closure, merger with each other, or converting them to banking agencies, while preserving the opening of branches and agencies stipulated by the approval of the board of directors of the Central bank of Libya.

5.     In the domain of the development of the commercial banks, there have been continuous efforts in this area through numerous technical committees established for this purpose. The recommendations of these committees have contributed in the work acceleration to develop these banks. The development has taken many aspects, the following are some of which:-

-      Increasing the capital of all public banks capitals in the following manner:
         Increasing the capital of each of the following banks, Jamhuriya, Wehda (SDRS)a, Umma and the National Commercial Bank to 100.0 million L.D .
-         Increasing the capital of Wehda Bank to LD108.0million
-         Increasing the capital of the Sahara Bank to 126.0 million L.D.

-             Restructuring the public commercial banks dministratively in accordance with the provisions of the Law no. (1) of the year 2005, where the duties of the chairman and other board of directors' members duties (part-timers) are separated from the duties of the general manager (full-timer). This law has stated that the number of the board's members should not be less than five and not more than seven members.

-             The law has also, obligated the banks to establish internal auditing department directly subordinate to the board of directors, and compliance unit directly subordinate to the board of directors too.

-             The law stated that the auditing and examinations of bank accounts and financial reports should be assigned to two external auditors who must prepare two separated reports about these accounts and reports in accordance with the international accounting and auditing standards. The first implementation of this provision was for the balance sheets of the banks of the year 2005.-            The financial treatment of the commercial banks employees is no longer subjected to the Law no.(15) of the year 1981, rather it is determined by the decisions taken by the banks' boards of directors according to the new banking law provisions.

-           The commissions charged by the commercial banks for the services rendered to the customers have been liberalized and are no longer determined by the Central Bank of Libya. Hence letting the competitiveness open between the commercial banks over the commission they charge their customers for their services.

-            The banks have begun, since the last three years, a Swift System for the banking operations that provide correspondence services between the banks and their correspondents concerning the informing and confirming the rates of credits and external transfers with the due acceleration, accuracy, and necessary confidentiality.

-             The implementation of the international payment system project is getting ahead. This is a vital important project that will increase the speed and efficiency of the banking services and improves them to be in line with the banking services in the advanced countries, especially those services related to the cheques clearance, fund transfers, credit cards utilization in the business operations, debts settlement and so on. It is expected that the first stage of the project will be completed during the next few weeks, while it is expected that the second stage will be completed by the mid-2007. The whole project should be complete by the end of the year (2007).

-            The Central Bank of Libya is preparing monetary, financial and banking indicators of the economic and financial performance on a regular periodic basis. These indicators are under consideration of the Bank's board of directors and both monetary policy and budget committees.

-             A remarkable improvement has occurred in the commercial banks loans portfolios, especially after the treatment and settlement of the public debts of the Public Treasury for these banks and the settlement of the debt of some public companies debited for these banks. It is expected that more improvement will take place in these portfolios once the prior confiscated private sector debts for these banks are settled.

-            The banks on their part are taking administrative and legal procedures that would improve their portfolios whether it was related to prior debts or the grant of new loans and credits, especially after the credit decision became in the hands of management and is no longer subject to external interference.

6.     The Law no. (1) of the year 2005 concerning the banking. This law has come to enforce the independence of the Central Bank and enhance his role in planning and executing the monetary policy. This law gave the Bank's board of directors more authorities in doing so. This what has been stated in the Articles related to the nature of the bank; his functions and departments; matters related to money issuance, foreign currency transactions organization; matters related to control over banks, monetary and credit policy management. The Law has authorized the Central Bank of Libya to apply some penalties on banks violating the provisions of law.

7.     Beginning from January 1est 2002 (immediately after the unify of the exchange rate) many procedures and operations of the monetary control was concealed. The constrains on the current operations and the personal purposes related to the foreign currency. Thus, Jamahiriya has accepted the provisions of the article eight of the International Monetary Fund agreement related to liberalization of the current account of operations and not imposing any restrictions on it.

8.     The Central Bank of Libya has closed many of the bank accounts of public companies in it enabling them to transfer them to commercial banks.

9.     The process of turning the public commercial banks into incorporated companies offering their capital for public underwriting of individuals and entities is getting ahead. The share of the Central Bank of Libya in the Sahara Bank was put in a public sale offer, and preparations are going ahead to put the Bank's share in the Weheda Bank for sale too. Accounting offices that will carry the evaluation process of the remaining three banks have been chosen, to determine the share value in each of these banks in order to offer the shares of the Central Bank of Libya  in these banks for sale.

Concerning the establishment of new commercial banks after the year 2001, four private commercial banks have been established:-
-         Aman Bank for Commerce and Investment
-         Alijmae Alarabi Bank
-         Wafa Bank
-         Waha Bank (owned totally by the Sahil and Sahara Bank)

10.       In the area of banking supervision : the task of the control and supervision of the Central Bank of Libya has reinforced over the commercial and regional banks, especially after the issuance of the Law no. (1) of the year 2005 concerning the banks, in order to achieve stability in the economic activity, and guarantee the soundness of the conditions of the banks and securing the rights of their depositors.

In this respect, the Central Bank of Libya is carrying the task of the on –site and off- site inspection and control on all working banks and their branches to insure this compliance with the banking law provisions and instructions issued in the respect. The regional banks have been subjected to continuous monitoring to insure the soundness of its conditions. The Central Bank of Libya has established many technical committees to evaluate these banks. These committees have concluded with proposing the following alternatives:-

-        Merging the regional banks in the National Banking Corporation.
-       Merging the regional banks regionally , that is on a geographical basis, or
-        Maintaining the situation in the regional banks as it is (for the banks that decide to do so). In this case, the respective regional bank bears the full responsibility of the decision it takes in this respect. The Central Bank of Libya will apply the legal conditions and standards requirements that obligate the regional banks to reform their situations with respect to the completion of their capital, the maintenance of the required  reserves and liquidity ratio and the compliance with the capital solvency otherwise it would be resorted to liquidation or concealment of the licenses given to practice the activity to those banks which their conditions continue illegally .
 
During the February 2006, twenty-one regional banks have merged in the National Banks Corporation which has turned itself into a commercial bank. It is expected that more other regional banks will merge with the Corporation during the year 2006.

11.       With respect to the utilization of new systems of commercial banks classification, a committee was established from the respective departments in the Central Bank of Libya to consider setting domestic rules and standards for the commercial banks classification in the light of the experiences of some friendly countries, as a first step toward the adoption of the international classification standards.


12.        In the context of enforcing the confidence in the banking system, both the issuance of the new banking law and due attention paid by the Central Bank in this respect have enforced the banking decision making independence, especially that relates to loans and credits granting and both funds utilizations and employment policies. The law has emphasized the confidentiality of the accounts of customers dealing with banks . The law has also, stated that a Fund should be established for the insurance of the depositors funds, so as to undertake the insurance operations on the deposits in the practicing banks.

Concerning the existence of a especial prosecution for the settlement of banking issues, Basic Popular Congresses have issued their decrees in this respect and both the General Peoples Committee for Justice and the Supreme Judges Council have approved to establish this prosecution, and arrangements are currently taking place to implement this decree on the ground.

13.       The Law no.(1) has made it mandatory for the commercial banks to have written credit policy based on clear bases. The commercial banks have, actually begun preparing and developing their written credit policies in the light of the general credit policy set and monitored by the Central Bank of Libya.

Monetary policy trends in the next stage:

1.     The emphasis is on the revision of the utilizations and rates of the monetary policy tools currently in use, the introduction of new tools that can be used in both financial and monetary markets and the improvement of the monetary and financial indicators that reflect the financial conditions of the banking sector.

2.     Continuing the restructuring process of the banking sector through the expansion of its ownership base by selling the shares of Central Bank of Libya in the capitals of the commercial banks, the implementation of the international accounting and auditing standards, improving the loans portfolios of these banks through the independent credit decision making to minimize the risks.

3.     Strengthening the banking control and emphasizing the banks commitment to legal requirements in the banking activity.

4.     Enforcing the confidence in the banks, letting them compete in the provision of better more timely services, in addition to emphasizing the importance of having a special banking prosecution to resolve issues related to this sector.

5.     Introducing new technologies in the banking activities through the completion of all stages of the National Payment System and benefiting of it in the areas of financial settlements, immediate check clearing, and working with credit cards system as means of payment for the commercial purposes and financial transfers, in addition to interlinking all banks and their branches with the Central Bank of Libya.