Central Bank of Libya

P.O. Box 1103, Tripoli / The Great Socialist People's Libyan Arab Jamahiriya Telegraphic Address: Misr Qlibya - Tripoli

Reference: A.R.M.N. / 790 Copy: A.R.M.N. No. (3/2010) Date: 10 Safar Corresponding to: 25 Al-Nar 1378 (Gregorian 2010)

---

To the Brothers / General Managers of Commercial Banks To the Brother / General Manager – Libyan Foreign Bank

In the Name of Allah, the Most Gracious, the Most Merciful

---

Subject / Credit Concentration Limits and the Controls and Standards Governing It

---

Based on the provisions of Law No. (1) of the year 1373 H.G. (2005 A.D.) concerning Banks.

And with reference to Circular A.R.M.N. No. (12/2008) issued on 14/07/2008, which circulated the decision of the Board of Directors of the Central Bank of Libya No. (46) of the year 1376 H.G. (2008 A.D.) concerning Credit Concentration Limits and the Controls and Standards Governing It.

And based on what the Board of Directors of the Central Bank of Libya concluded in its sixth meeting of the year 1377 H.G. (2009 A.D.) held on 05/11/1377 H.G. (2009 A.D.).

We inform you that the Governor of the Central Bank of Libya has issued Decision No. (2) of the year 1378 H.G. (2010 A.D.) on 20/01/2010 A.D., concerning Credit Concentration Limits and the Controls and Standards Governing It.

And as we refer you to the Governor's Decision No. (2) mentioned above, you are requested to act in accordance with its provisions and implement it, as the decision of the Board of Directors of the Central Bank of Libya No. (46) of the year 1376 H.G. (2008 A.D.) concerning Credit Concentration Limits and the Controls and Standards Governing It, which was previously referred to you in Circular A.R.M.N. No. (12/2008) issued on 14/07/2008, is hereby repealed.

---

Dr. Mohammed Abduljalil Abusnina Director of the Banking and Currency Supervision Department

---

Copy to:

• The Brother / Governor
• The Brother / Deputy Governor
• The Brother / Director of Affairs of the General People's Committee for Financial Supervision at the Supervision Authority
• The Brothers / Assistants for Specialized Banks (Development - Agricultural - Savings and Real Estate Investment + Rural)
• The Brother / Director of the Supervision Department - Central Bank of Libya
• The Brother / Director of the Legal Department - Central Bank of Libya
• The Brothers / Managers of Central Bank of Libya branches (Benghazi - Sabha - Sirte)
• The Brother / Secretary of the Board of Directors of the Central Bank of Libya
• Publication with the approval of the Central Bank of Libya on the Internet

---

Decision of the Governor of the Central Bank of Libya

No. (2) of the year 1378 H.G. (2010 A.D.), concerning Credit Concentration Limits, and the Controls and Standards Governing It

---

Governor of the Central Bank of Libya

Having reviewed Law No. (1) of the year 1373 H.G. (2005 A.D.) concerning Banks.

And having reviewed the decision of the Board of Directors of the Central Bank of Libya No. (46) of the year 1376 H.G. (2008 A.D.), concerning Credit Concentration Limits, and the Controls and Standards Governing It.

And having reviewed the memorandum submitted by the Banking and Currency Supervision Department, regarding the financial center structures of banks and their credit profiles, after consulting banks on them.

And having reviewed what the Board of Directors concluded, in its sixth meeting of the year 1377 H.G. (2009 A.D.), held on 05/11/1377 H.G. (2009 A.D.).

---

Chapter One

General Provisions

Article (1)

The maximum limits of credit concentration that may be permitted for banks, in each type of investment, shall be in accordance with the standards and controls set out in the following chapters of this Decision.

Article (2)

The Banking and Currency Supervision Department shall prepare the necessary forms for applying the provisions of this Decision, and the practical examples thereof, and circulate them to the banks.

---

Chapter Two

Credit Facilities and Loans

Article (3)

Each bank must submit monthly reports to the Banking and Currency Supervision Department, according to each of the forms stipulated in the previous Article, no later than the end of business on the tenth day of the month following the month for which the reports are prepared. The aforementioned Department shall, through banking supervision procedures (office and field), review the indicators derived from the monthly financial center of each bank, and compare them with the data contained in the monthly reports submitted to it.

Article (4)

Without prejudice to the regulations and penalties imposed under the Banks Law, if any bank exceeds the limits, ceilings, or ratios specified by the provisions of this Decision, it must settle its status and remove the violation, by adopting one or more of the following measures:

1. Strengthen its own funds by increasing its capital, or by not distributing dividends.
2. Obtain additional guarantees, or measures that reduce the ratios of exceeding the prescribed ceilings or limits.
3. Work on recovering debts, and expediting the procedures for following up and collecting them.
4. Obtain time deposits from major shareholders, which are invested in other banks, such that they cannot be withdrawn or transferred before the exceedance is removed.

Article (5)

First: Credit facilities granted to a single natural or legal person, or to a group of related persons, must not exceed (20%) of the bank's core capital, whether these facilities are direct (on-balance sheet), or indirect (off-balance sheet).

Second: The total credit facilities granted to natural persons and legal persons, or groups of related persons, whose debt for each one, or related group, reaches (10%) ten percent or more, of the value of the bank's core capital, must not exceed (8) eight times the value of this capital.

Third: The credit facilities mentioned above shall be calculated based on the limits granted for the facilities or the utilized balance, whichever is greater.

---

Article (6)

Related groups, for the application of the provisions of this Decision, refer to persons or entities that fall under any of the following cases:

1. The entity or entities whose management or the nature of their operational policies the debtor customer of the bank controls, directly or indirectly (through his spouse, children, or persons dependent on him), through one of the following means:

   • Ownership of the majority of voting rights or majority of ownership rights therein.
   • Existence of a management contract that grants the debtor control over the operational and financial policies of the entity.
   • The ability to appoint or dismiss the majority of the board of directors members of the entity.
   • The ability to control the majority of votes of the board of directors members of the other entity.

2. Entities guaranteed by the customer.

3. Other entities specified by the Central Bank of Libya, through its supervisors calculating the maximum limit stipulated in Article (5).

Article (7)

Loans and credit facilities granted by the bank to companies in which it participates in their capital shall be subject to the following limits and controls:

1. The total amount granted to a single company must not exceed (10%) ten percent of the bank's core capital.

2. The bank must not grant discriminatory treatment to companies in which it participates in their capital, and must subject them to the same conditions applied to other customers.

---

Article (8)

When calculating the credit concentration ratios stipulated in the previous articles, the value of loans and facilities shall be reduced by the value of guarantees provided to the bank, as follows:

1. Cash Collateral and Guarantees:

   • The value of cash collateral and guarantees shall be reduced according to the following conditions:
     • (a) The bank must have a binding letter regarding the cash collateral, signed by the account holder linked to the loans and facilities granted and assets, and non-withdrawable.
     • (b) The cash guarantee for indirect facilities must be deposited in a linked account as per regulations and non-withdrawable.
     • (c) The cash collateral or cash guarantee must be in the same currency as the facilities. If the cash collateral or guarantees are in a different currency than the facilities, 80% of their value shall be reduced, provided they are in one of the convertible currencies.
     • (d) The cash collateral or cash guarantees must be held by the bank at the lender of the loan or facility, or at banks operating in Libya known to the granting bank, taking into account the financial solvency of the other bank holding this cash collateral.

2. Gold Bullion:

   • The value of loans and facilities shall be reduced by no more than 80% of the market value of gold bullion provided as collateral for these loans and facilities.

---

Article (9)

The above reduction ratio applies to the market or fair value of securities, and in the absence of a market or fair value for these securities, the reduction ratio applies to the nominal value of the securities.

• If the approved value of the securities provided exceeds the value of the loans or facilities, the reduction ratios shall be calculated on the value of the facilities or the value of the securities, whichever is less.

• If the currency of the securities is different from the currency of the facilities, the ratios shall be reduced by 20%, provided the currency is one of the convertible currencies.

4. Securities Issued by Joint Stock and Private Companies:

The debt value shall be reduced for the purpose of calculating credit concentrations, by no more than 60% of the market value of the securities that the bank accepts as collateral for the loan or facility, provided that these securities are registered and tradable in the Libyan Securities Market, and that the pledge of these securities to the bank is certified by the Depository Center of the Securities Market.

---

Article (10)

If the value of the requested loan or credit facility exceeds the ratios or maximum limits stipulated in the previous articles, the bank must seek other banks to enter into a financing consortium, without the need to refer to the Central Bank of Libya for this, provided that each bank's share in the loan or facility is in accordance with the prescribed limits and ratios.

---

Chapter Three

Foreign Investments and Accounts with Correspondents

Article (11)

The total balance of foreign currency held by the bank with its correspondents abroad must not exceed (200%) double its core capital (without taking into account the value of customer deposits in foreign currency at banks), provided that what the bank holds from these balances with a single correspondent does not exceed (70%) seventy percent of its core capital.

Article (12)

The correspondent with whom the bank deals must be classified by well-known global rating agencies, with a rating grade not less than (A-). This condition is exempted for the Libyan Foreign Bank and the Central Bank of Libya.

---

Chapter Four

Investment in Securities

Article (13)

The net value of the bank's investments in the securities portfolio, which it holds for trading or resale, for the purpose of achieving capital gains, or held to maturity, must not exceed (15%) fifteen percent of the value of its core capital.

Article (14)

Investments in securities issued by the Libyan State, whether these securities are in the form of bonds, treasury bills, certificates of deposit, or otherwise, are not included in the calculation of the ratio stipulated in the previous article.

---

Article (15)

Securities in which investment is made must be listed in the Libyan Securities Market, or any of the other financial markets approved by the Central Bank of Libya for dealing.

Article (16)

The management of each bank must establish policies and procedures governing investment in financial investments, and these policies and procedures must specifically include the types of securities that can be invested in, the investment ceilings for each type, and the markets and countries that can be dealt with, and their limits with each.

---

Chapter Five

Participations

Article (17)

The maximum limit of the bank's participation in the capital of other joint stock companies (the investment portfolio managed by the bank for holding purposes) must not exceed (10%) ten percent of the paid-up capital of a single company.

Article (18)

It is required that the nominal value of the total shares owned by the bank in other joint stock companies does not exceed (50%) fifty percent of the value of its core capital.

Article (19)

Shares that accrue to the bank in satisfaction of debts owed to it by third parties are not included in the calculation of the ratios specified in the previous two articles, provided that the bank sells and disposes of them within a period not exceeding two years from the date they accrued to it.

---

Chapter Six

Fixed Assets

Article (20)

The total value of the bank's fixed assets (tangible and intangible), added to the value of its participations in the capital of other companies (long-term investments), must not exceed the value of its core capital.

Article (21)

The value of real estate that accrues to the bank in satisfaction of debts owed to it by third parties is not included in the calculation of the limit stipulated in the previous article, provided that the bank sells and disposes of them within a period not exceeding two years from the date they accrued to it.

Article (22)

This Decision shall be effective from the date of its issuance, and the Banking and Currency Supervision Department shall take the necessary measures to implement it. The decision of the Board of Directors of the Central Bank of Libya No. (46) of the year 2008 A.D. concerning Credit Concentration Limits, and the Controls and Standards Governing It, is repealed.

---

Farhat Omar Bin Qadada Governor

Issued on: Corresponding to: 20-01-2010