Regulatory Alerts2023-07-12
Circular No. 2/2016
The Central Bank of Libya issued Circular No. 2/2016 to establish a regulatory mechanism for opening and supervising Letters of Credit, addressing operational deficiencies and preventing fund smuggling. The circular mandates commercial banks to designate specific branches for Letter of Credit services, link them to the unified banking system, and enforce strict internal audit and accountability procedures throughout the issuance process. It further requires banks to ensure that imported goods match transferred funds in value and pricing, thereby aligning foreign currency usage with actual trade flows.
Central Bank of Libya Postal Code: 1103 | Telex Address: Misrifya - Tripoli, Libya Reference No.: 804/CMR
Circular CMR No. (2016/2) Date: 28 Rabi' al-Awwal 1437 AH Corresponding Date: January 7, 2016 AD.
To: The General Managers of Commercial Banks To: The Chairmen of the Interim Administrative Committees of Commercial Banks To: The General Manager, Libyan External Bank
Greetings...
Subject: Regulations, Conditions, and Procedures Governing the Issuance of Letters of Credit.
Based on the provisions of Law No. (1) of 2005 concerning Banks, and its amendments;
And with reference to Circular CMR No. (1) of 2013, issued on January 2, 2015, through which the decision of Mr. Governor of the Central Bank of Libya No. (1) of 2013 was transmitted, regarding the regulation of foreign currency transactions, and defining the powers to execute external remittances for various purposes.
And with reference to Circular CMR No. (3) of 2015, issued on April 30, 2015, which transmitted the decision of Mr. Governor of the Central Bank of Libya No. (96) of 2015, regarding establishing regulations to govern the use of foreign currency for issuing Letters of Credit and collection documents, and conditions for opening Letters of Credit for import purposes from abroad.
And since the Central Bank of Libya emphasizes the necessity of avoiding certain deficiencies in banks' operational supervision systems when issuing Letters of Credit for supplying goods and merchandise, through exercising due care and adhering to prevailing regulations in this regard, activating audit and internal control procedures, and supporting accountability principles at all stages of issuing Letters of Credit to realize the genuine benefits for which they were activated, and limiting manipulation by making them a means of smuggling funds abroad without corresponding goods entering at prices and valuations commensurate with the value of these transfers,
we hereby issue to you the instructions of the Central Bank of Libya establishing a mechanism for regulating the issuance of Letters of Credit, in accordance with the following regulations, conditions, and procedures:
First: General Regulations for Issuing Letters of Credit:
- Each bank must determine the banking branches it wishes to allocate for providing Letters of Credit services and link them to the unified banking system, taking into account in their determination www.cbl.gov.ly, swift code:CBLJLYLX, Fax: +218 21 444 1488, Tel: +218 21 333 3591 Page 7 of 1