The Central Bank of Libya (CBL) issued a clarification statement yesterday regarding documentary credit procedures, emphasizing that its role and that of the banking system are limited to oversight and regulation, in accordance with applicable laws and regulations.
The CBL’s clarification statement comes in response to criticism it received from Economy and Trade Minister Mohamed Hwej on 17 January during a media interview.
The CBL’s role in granting LCs is limited
The CBL stressed that granting documentary credits is not within its purview, nor that of commercial banks. This is a purely commercial banking process carried out by licensed commercial banks according to their credit and documentary standards. The CBL’s role is limited to covering the value of approved documents after review.
Banks process applications based solely on submitted legal and financial documents
The CBL clarified that the issuance of licenses or commercial registrations for companies is the responsibility of the relevant administrative bodies, such as the Ministry of Economy and Trade. Once a company obtains these licenses, banks process its applications based solely on the submitted legal and financial documents.
Not CBL’s role to determine market needs for goods and services
The CBL further stated that it is not within its or commercial banks’ responsibilities to study or determine market needs for goods and services, or to rank companies in this sector. These tasks fall under the jurisdiction of the relevant governmental and economic authorities.
CBL refers statistical data to relevant regulatory bodies
The CBL said that in line with its commitment to transparency and cooperation with regulatory bodies, it refers statistical data and reports related to letters of credit to the relevant regulatory and financial authorities, such as tax and fee collection agencies. This data is intended for use in procedures related to collecting government dues, assisting these authorities in identifying market needs and monitoring economic activities, and enabling them to take appropriate legal action against companies that violate regulations and laws.
Banks only responsible for credit and documentary evaluation of clients
The Central Bank: It is not within the Central Bank’s purview to determine market needs. Its responsibility does not extend beyond its legally mandated regulatory and supervisory role. Banks are responsible only for the credit and documentary evaluation of clients, while other entities bear their responsibilities according to their respective jurisdictions, whether it be maintaining prices, determining quantities, regulating the entry of goods, or preventing smuggling.
CBL response to Economy Minister’s criticism
As alluded to, the CBL’s clarification statement comes in response to the criticism it received from Economy and Trade Minister Mohamed Hwej on 17 January during a media interview.
Hwej criticised the CBL for monopolising trade policies, with the Ministry of Economy completely excluded from determining the local market’s needs for goods.
He said official bank import credits for are being granted by the CBL based on priority of booking and demand, not according to market needs, due to the monopoly and control of major merchants.
Hwej expressed his concern about the depletion of Libya’s hard currency reserves. He said there is a major flaw in the management of foreign currency and reiterated that his Ministry of Economy is not currently responsible for letters of credit.
Hwej said the CBL must refrain from interfering in trade policy and adhere to monetary policy and that his Ministry’s current involvement in the letters of credit issue can be described as forced. He stressed that CBL entral Bank Governor Naji Issa is highly competent but added that he needs to change the CBL’s policies. He said the tax imposed on the dollar (surcharge) should only apply to luxury goods.
He said the import budget falls under the jurisdiction of the Ministry of Economy, which will assume responsibility starting this year.
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