Privatization of Banks in Libya

Privatization of the banking sector in Libya was limited to Sahara Bank and Wahda Bank – No3 and No4 bank in the country. The head of the largest bank in Libya discusses the outlook for privatization of the banking sector. BNP Paribas assumed 18% of Sahara Bank and Arab Bank, the largest bank in the Arab world assumed 18% of Wahda Bank. The privatization, in Rajab’s opinion, did not go smoothly and the subsequent problems emerged.

Regarding the privatization of the largest bank in Libyan banking space, Rajab answers that while the government should retain at least one governmental bank the other banks could be slowly privatized: “In my opinion, this should be taken by the Ministry of Finance. Libya should have one government bank. But for the other banks, they should be put on the stock market and sold to the private sector gradually after they do their 2011 and 2012 financial reports and financial statements. Some international company should probably do a proper valuation to determine the proper price for shares for the bank.”

This could kick-start the sluggish local stock exchange and “give opportunities even to international investors or local investors to take shares, thus improving the local stock market. It is not very active; there are currently only small shares from certain companies in Libya. Really the stock market is not what it should be in our country,” adds Rajab.

Further to the regulation the Central Bank of Libya should impose the higher threshold for minimum capital requirement for new banks. For example, the minimum capital required right now is 30 million Libyan dinar, which is low compared to the international best practices and could pose a threat in the future.