The CBL started its operations on April 1, 1956. Replacing the formerly established “Libyan Currency committee”, which was established in 1951. The functions of the committee were limited to backing the issued local currency with Sterling assets, thus having no role in controlling money supply, credit, or in commercial banks supervision.
The CBL derives its functions and powers from the Bank law no. 1 2005.
The primary mission of the CBL is to achieve and maintain price stability within the context of monetary policy in the interest of balanced and sustainable economic growth in Libya. It also plays a pivotal role in ensuring financial stability.
The Board of Directors is in charge of the management of the CBL; consisting of the Governor as chairman, Deputy Governor as Vice-Chairman, and seven other members, who represent other financial and economic interests. The Governor is the chief executive officer responsible for the implementation of the CBL’s policies and the management of its affairs; he also represents the CBL in all its associations with other parties.
The CBL’s objectives:
- Issuance of Libyan banknotes and coins.
- The stability of currency in Libya.
- Management of Reserves and Control of Foreign Exchange.
- Regulating the quantity, quality and cost of credit to meet the requirements of economic growth and monetary stability.
- Taking appropriate measures to deal with foreign or local economic and financial problems.
- Lender of last resort.
- Supervising Commercial banks to ensure the soundness of their financial position and protecting the rights of depositors and shareholders.
- Acting as a banker and fiscal agent to the state and public entities.
- Managing and issuing all state loans.
Objectives and Main Duties:
Issuance and regulation of Libyan currency:
The Libyan Dinar (LD) is the unit of currency in the country. To insure exchange rate stability and protect the economy from oil price fluctuations, it was pegged to the IMF’s Special Drawing Rights (SDR) basket on March 18, 1986.
Management of Reserves and Control of Foreign Exchange:
The CBL holds and manages the Libya gold and foreign exchange reserves. Thus the CBL is responsible for selecting suitable investments taking into consideration developments in foreign exchange, currency, and capital markets to ensure safety and profitability. The CBL allows Commercial banks to keep foreign assets in accordance with regulations in conformity with the general economic interests of the country.
The CBL has gradually dismantled foreign exchange controls to encourage foreign investors.
Acting as a Banker of the state
The CBL is the financial agent for the state and, as such, it keeps the accounts of revenues and expenditures for general secretariats. It also disburses transfers and collects funds, as well as it administers letters of credit transactions on behalf of its clients. These banking services are also offered to public institutions.
On behalf of the government, the CBL administers the State’s regional and international agreements, and it manages and executes payments and commitments between Libya and other countries.
Regulating of Banking Activities
The CBL examines and analyses the financial positions of Commercial banks and ensures that the Reserve Ratio is maintained. The CBL, thru its monetary and Macroprudential policies, affects the operations of the banking sector, to enhance its intermediary role, and to make more compatible with the occurring situation of the economy.
The CBL inspects and examines the records of commercial banks and their branches to ensure accuracy and soundness in the sector. The CBL provides the Commercial banks with check clearing services as well as the services of a centralized credit risk office. It also has the responsibility of checking the suitability of the services that offered by the commercial banks.
The CBL’S Role in Economic Development
The role of the CBL in economic development in Libya is manifested directly in creating monetary and financial institutions capable of mobilizing and channeling savings for development projects. The CBL also contributes to strengthening the State financial position through its holdings of gold and foreign exchange.
The CBL’s indirect role in the economic development of Libya is embodied in its influence over the activities of commercial banks, especially by affecting the volume, direction and cost of credit thru its Monetary and Macro-prudential policies tools. The other aspect of the CBL’s indirect role lies in the adoption of monetary policies capable of reinforcing internal and external confidence in the strength and stability of the Libyan currency and economy and, consequently, encouraging savings by citizens and promoting incentives for the utilization of these savings in productive and safe investment, as well as attracting foreign investments.