The Central Bank of Libya, established in 1956, supervises the national banking system, regulates credit and interest, and issues bank notes. It also regulates the volume of currency in circulation, acts as a banker to the government, provides clearinghouse facilities for the country's commercial banks, and administers exchange control. Since 5 August 1962, the bank has been vested with a monopoly in the import of fine gold.
Libya formerly had branches of many Arab, Italian, and British commercial banks; they were nationalized in 1969. The government ruled that 51% of the capital of each should be taken over by the government, which paid the value of this share. Thus, the Banco di Roma became Umma Bank, Barclays Bank eventually became Jamahiriya Bank, and the Banco di Sicilia became the Sahara Bank. The commercial department of the Central Bank was merged with two small banks to form the National Commercial Bank. In 1972, a reorganization of the commercial banks left the Jamahiriya and Umma banks owned by the Central Bank of Libya; two other institutions, the Sahara Bank and the Wahda Bank, were jointly owned by the Central Bank and private interests.
The National Agricultural Bank, established in 1957, provides advice and guidance on agricultural problems, advances loans to farm cooperatives, and generally assists the agricultural community. The Industrial and Real Estate Bank, founded in 1965, made loans for building, food-processing, chemical, and traditional industries; later it was divided into the Savings and Real Estate Bank and the Development Bank. A decree in 1966 abolished interest on loans made by the government development banks. In 1972/73, the government created the Libyan Arab Foreign Bank, later renamed Jamahiriya Foreign Bank, owned by the Central Bank of Libya, to invest in foreign countries. In 1981, its role in foreign investment was taken over by the Libyan Arab Foreign Investment Co.
In 1997, in addition to the central bank, there were eight other banks in Libya: the Agricultural Bank, Jamahiriya Bank, Libyan Arab Foreign Bank, National Commercial Bank, Sahara Bank, Savings and Real Estate Investment Bank, Umma Bank, and Wahda Bank. In 1994, Libyan financial assets frozen in the US alone amounted to some $1 billion. Interest rates are fixed by the central bank, which has applied a discount rate of 5% since 1980. The maximum lending rate for secured loans and overdrafts currently stands at 7%.
The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $11.3 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $15.2 billion. The money market rate, the rate at which financial institutions lend to one another in the short term, was 4%. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 5%.
There are no securities exchanges in Libya.