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Libya's Central Bank Launches Repurchase‏ ‏Agreements to Reform Banking ‎System
17/05/2008 17:14:00
Libya's Central Bank on Tuesday launched repurchase agreements for the first time as ‎part of reforming the country's banking system, a bank official said‏.‏

‏"‏The Central Bank reached accords today with the country's main banks to launch ‎repurchase agreements. Such agreements did not exist in the banking system before ‎and they are new. The repurchases rate are fixed at 4.25 percent for now," Ali ‎Ramadane Chnebech, the bank's research department chief, told Reuters‏.‏

‏"‏The Central Bank would have a new tool to manage in an indirect way the liquidity ‎of the banking system," he told Reuters by telephone from the Central Bank's ‎headquarters in Tripoli, which would be "more efficient for the banking system‏."‏

The Central Bank started also on Tuesday an electronic auction trading system on 91-‎day treasury bills and hiked the rate for certificates of deposits to 2.25 percent from ‎‎1.75 percent‏.‏

‏"‏The RTGS (Real Time Gross Settlement) auction system is also new. It replaced the ‎old system of papers. It allows rapid access to the market by banks and permits the ‎central bank to mop up liquidity when the need arises," Chnebech added‏.‏

‏"‏The rate was increased also to help fight inflation which is emerging now," he said ‎but he gave no more precise details.

Libya, with a population of 5 million and the biggest holder of oil reserves in Africa, ‎is moving to modernize its banks.

Executives complain that the banking system, nationalized in 1970, remains highly ‎centralized. The government passed a law in 1993 that allowed the establishment of ‎private sector banks but the sector remains dominated by state-owned institutions.

As a result, foreign banks have been slow to enter the north African oil producing ‎country despite a 2005 law permitting them to open branches, largely because of what ‎bankers call bureaucratic regulation and old-fashioned administrative procedures‏.‏

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