Several Libyan commercial banks have notified their customers of the temporary suspension of letter of credit (L/C) processing and other key financial services due to ongoing turmoil at the Central Bank of Libya.

An escalating and sometimes violent contest over the control of the CBL follows years of turmoil at the bank due to a combination of political fragmentation, leadership disputes, economic challenges, security concerns, and external influences.

The situation reflects the broader instability in Libya, where the lack of a unified government and ongoing conflict continues to undermine the country's financial and economic stability.

L/C processing

The suspension affects essential services such as the processing of L/Cs, foreign currency purchases, check deposits, local and SWIFT international money transfers.

Libya needs a functioning central bank to process L/Cs because it plays a critical role in managing the country's financial system, including the oversight of foreign exchange reserves and the regulation of financial transactions.

Kidnapping and siege

The bank halted its operations earlier this month following the kidnapping of its head of IT from his home, alongside threats directed at other senior executives.

This incident was preceded by a week-long siege of the central bank's headquarters by armed individuals.

Power struggle

The abductors, reportedly supported by Government of National Unity Prime Minister Abdel-Hamid Debeiba, forced the sacking of the bank's influential governor, Sadiq al-Kabir, who has held the position since 2012.

During his tenure, al-Kabir has accumulated a substantial surplus from Libya's oil revenues, attracting significant interest from various parties.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.