In July 2006, the Central Bank of Libya (CBL) with the support of international advisors started to develop a vision, strategy, and plan of action to modernize the banking system of Libya. Part of this overall approach involves a program to open the Libyan banking sector to international banks to attract their experience, skills, and technology to serve Libyan customers more effectively and efficiently.
After a first assessment phase during which the different dimensions of financial sector modernization have been analyzed and improvement initiatives defined, a Program Management Office (PMO) has been set up within the CBL to initiate, coordinate and manage implementation.
The CBL’s vision for the Libyan banking system is “a well functioning, healthy and well capitalized financial system that is well regulated and supervised, contributes to the overall growth of the economy, and satisfies Libyan customers’ financial needs by offering quality products and services”.
To achieve this vision, the CBL, the Libyan Government and the individual banks are taking concrete action to:
1- Strengthen competition and market conduct
2- Improve risk management through better supervision, governance, and internal controls
3- Enhance customer service by expanding the range and quality of financial products and services.
Consistent with the vision, the CBL has developed a strategy to strengthen and modernize the Libyan banking system. This strategy foresees action across three different dimensions:
1- Modernization of the financial sector: identification and implementation of numerous initiatives to develop the environment for financial services while making the market more attractive to investors and foreign banks.
2- Restructuring of public commercial banks: definition and launch of a comprehensive turnaround program to modernize and improve the current performance of public commercial banks.
3-Progressive opening to foreign institutions: support for the immediate opening of the market to both domestic and foreign investors through coordination of the sale of a stake in Sahara Bank.
To implement this strategy, the CBL has already launched specific initiatives aimed at increasing transparency, supervision and governance within the Libyan financial sector. These initiatives give particular attention to the introduction of sound credit risk management practices that will help to improve the quality of the system’s credit portfolio.
In parallel to the launch of specific initiatives, the CBL is increasing the number of specialized employees within the Libyan financial sector who can support this modernization program. To achieve this, the CBL is cooperating with a series of international organizations to provide training and resources.
Commercial banks are also actively involved in the overall process and are currently defining their own performance improvement plans that will guide them to succeed in a more liberalized and competitive market.
Foreign banks are going to play an important role in the mid term since it is expected that the sale of a stake in Sahara Bank to a leading international institution will foster the transfer of skills and technology and improve the range of available products and services.
This progressive opening of the Libyan banking sector to international institutions has already started with the formal request for interest published at the end of February in major regional and international media and will soon enter the critical phase of selecting a shortlist of potential acquirers. The appointment of international advisors such as Rothschild, KPMG and Baker & McKenzie is a natural consequence of the decision by the CBL to follow strict international best practices throughout the process.
Modernizing the Libyan financial sector is complex and will naturally take time. However, it will have an important and positive impact on the rest of the economy. As important as the various initiatives being taken, the process itself needs to be carefully planned and managed.
The CBL is therefore fully committed to achieving these ambitious targets within a sensible timeframe and to making the overall process as transparent as required.
As implementation progresses, further specific communication will be made available through this website and other appropriate channels.
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