The National Transitional Council will close down the central bank it started in March
Just two months after the start of the uprising against Muammar Gaddafi, the leaders of Libya’s rebel movement took the unusual step of creating a new central bank, the Central Bank of Benghazi.
As the rebels seek to take full control of Libya, the National Transitional Council (NTC) is expected to wind up the central bank it had created, and move to take over the existing Central Bank of Libya and replace several of its senior staff appointed under Gaddafi’s rule.
“There will be one central bank, the one we created was temporary,” says Mustafa Elhuni, a member of the NTC’s economy and finance committee. “The central bank will go back to normal, but some of the people and the governor will probably be changed.”
Former Gaddafi-appointed governor Farhat Bengdara defected in March and has since been trying to offer support to the NTC. He has formed the International Association of Libyan Bankers, an unofficial group of local and international bankers aiming to support the reconstruction of Libya’s banking sector.
How much of an impact the turnover in personnel will have on the banking sector is unclear. Until the outbreak of the anti-Gaddafi movement this year, Libya had been working hard to open up its financial sector to foreign capital, meet with credit ratings agencies and train local officials.
Several large international banks and some regional ones had been looking at opportunities to establish a presence in Libya, although since the start of the year most evacuated any personnel they had in the country and put those plans on hold.
Italy’s Unicredit was awarded the first licence to operate in Libya with a local partner, beating off competition from the UK’s HSBC and Standard Chartered, the UAE’s Mashreqbank, National Bank of Dubai and Qatar Islamic Bank. Before Bengdara’s defection, he had hoped to issue a second licence to a foreign bank this year.
Libya’s oil wealth and need for investment to develop the country will continue to make the country attractive for foreign banks, but many will be cautious until political stability returns. “Obviously interest in Libya has cooled since the beginning of the year, but it won’t be long before the regional and international banks are back looking at opportunities to set up on the ground,” says one banking analyst in Dubai.
Many international banks already have close ties with the Gaddafi regime through their work for the Libya Investment Authority, which is thought to control around half of Libya’s foreign assets, put at around $150bn by the IMF.
With the capital available from Libya’s savings and oil income, Libya will be much more in need of foreign expertise in how to structure and finance development projects and restore the functioning of the banking sector, than foreign capital.