Modernizing the Libyan Banking System to Promote Economic Growth and Development

1. 22 November 2008 Modernizing the Libyan Banking System to Promote Economic Growth and Development ATUGE Conference, London Mr Faisal El Gajiji, Central Bank of Libya Dr Marc Stephens, consultant

2. Overview of Libya and its banking sector • Reform program in the banking sector • Career opportunities for managers Agenda

3. Lifting of sanctions Opening for international investors Developing reform agenda Libya has recently begun to re-enter the international financial community • In 1999 United Nations suspended aerial, arms and diplomatic measures in place against the Libyan Government • In 2003 the UN Security Council formally lifted sanctions against Libya • In 2004 the US lifted its trade embargo, allowing bilateral commercial activity and financial transactions to resume • In the last few years, Libya has started opening its market to foreign companies • In January and August 2006, Country Leader Muammar Gaddafi and Prime Minister Ali al-Mahmoudi publicly declared interest in offering opportunities to foreign banks to invest in Libya • In January 2007 CBL started a process to sell a minority stake in one public bank • Since 2005, Libya has been developing a new economic strategy to improve Libya’s competitiveness • In 2006, the Central Bank of Libya began to develop a financial sector reform strategy which is being implemented throughout 2007 and 2008 Source: Team

4. 1970–1990 • 1990s • 2000s • 2006 The banking sector is moving towards liberalization • 2007 … • All the Libyan banks are nationalized • In 1993 the government introduces a law allowing the establishment of private sector banks • In 2002 Libya started considering to privatize some of the country’s banks; as of 2006, today the private sector owns minority stakes in Sahara Bank and Wahda Bank • In January and August 2006, the government declares interest in attracting foreign banks to Libya • Sale of minority stakes in publicly owned commercial banks to international financial institutions • In 1996 the Bank of Commerce and Development is the first privately owned bank offering conventional retail and corporate banking services • Under the new banking law, passed in 2005, foreign banks can operate in Libya • Central Bank of Libya develops financial sector development road map Source: Economist intelligence unit; “Libyan Banking System” Rating Developments – May 2002; press

5. 33.1 The recovery in oil prices and the relaxation of sanctions have given the Libyan economy a substantial boost . . . • CAGR • +26% • 2007 USD* • GDP at current prices • LYD billion • 64.1 billion • +6% • GDP at constant prices • 2002 LYD billion • n.s. • 2002 • 03 • 04 • 05 • 06 • 2007 * Converted at the 31/12/2007 exchange rate of USD 1 = LYD 1.2239 Source: Global Insight (WMM) Source: “Libya country profile 2005” – Economist intelligence unit

6. 134.4 . . . making Libya the wealthiest North African nation on a per capita basis 2007 • GDPUSD bn • Of which oil • Percent • Populationmn • GDP per capita • USD • Libya • 64.1 • 72 • 6.1 • 10,533 • Algeria • 134.4 • 30 • 33.9 • 3,970 • Tunisia • 35.2 • 10.3 • 3,408 • Morocco • 74.8 • 32.4 • 2,309 • Egypt • 129.5 • 76.9 • 1,685 Source: Global Insight (WMM), CIA World Fact Book, National Economic Development Board of Libya

7. Libya – an Arab nation with ready access to Europe and Africa • Libya is a gateway to the Middle East and North African (MENA) region, which has: • Over 300 million Arabic speakers • GDP of over USD 500 billion • Libya’s links to Europe have been rebuilt since the embargo was lifted in 1999 • Libya is a major participant in the African Union 3½ hours to London ½ hour to Tunis

8. Reform program inthebankingsector • Overview of Libya and its banking sector • Career opportunities for managers Agenda

9. Vision • “A well-functioning, healthy and well capitalized financial system that is well regulated and supervised and that contributes to the overall growth of the economy and satisfies customers financial needs in Libya by offering quality products and services” • A vision for the overall Libyan financial system has been defined

10. “Vision” • 1 • 7 • 2 • 8 • 3 • 9 • 10 • 5 • 6 • 4 Program architecture • Building best-practice skill-building at local banks: • The program has leveraged on a dedicated, Program Management Office (PMO) including overarching high potential CBL resources & foreign “top-notch” consultants • For the Specialized Banks CBL will limit his support to an advisory role towards the Ministry of Finance • Establishing an excellent banking infrastructure • Among infrastructural initiatives • Credit bureau has been inserted into the PMO due to synergies with credit skill initiative • Other initiatives are currently under the direct responsibility of the Central Bank • The archi-tecture of this program is based on two main “pillars” • Pillar 1 • Pillar 2 • Building best practice skills at local banks • Establishing an excellent banking infrastructure • Attraction of foreign strategic partners • Building of strong national banks • Creation of excellent credit capabilities • Upgrade of HR (Human Resources) skills • Split NBC into two entities: operating bank and recovery vehicle • Turnaround of the Specialized Banks • Building of the new National Payment System • Establishment of a new banking supervision • Modernization of overall CBL organization • Introduction of a new Credit Bureau • Key initiatives

11. Creditprogram • HR program • NCB • Credit Bureau Concrete results achieved • First privatization closed in September 07 (19% share sold to BNP-Paribas) • “Best practice process” at international level, • Much faster compared to other countries (e.g., Algeria) • Second privatization closed in March 08 (19% share sold to Arab Bank) • Merged the two banks into the new Gumhouria Bank, the National Champion • “The machine is moving ahead”; significant progress made since program launch • New credit methodology and processes already functioning in 25% of branches • New high potential people hired from abroad and new performance management systems piloted • Designed new organization and launched turnaround program (currently in piloting phase) • Software Vendor selection completed and implementation on going

12. Still, a lot remains to be done – Building best practice skills at local banks (1/2) • Initiatives • Key milestones ahead • Expected time horizon 1 • Attraction of foreign strategic partners • No predefined milestones at the moment • Evaluate possible new foreign banks entry (e.g., for Private Banks) • - • Need for • Strong commitment from Central Bank and commercial banks • Complete buy-in from all stakeholders in the country • Continuous support from providers of best practices in designing, rejuvenating and implementing the various initiatives 2 • Building of strong national banks • National Champion-Complete integration and launch modernization • Complete integration process by 2008 • Launch modernization initiatives during rest of 2008 • Roll out NCB turnaround • Pilot results expected by mid-2008,roll out to be launched by 2008 • Private Banks strengthening • Define Private Bank strategy by Summer 08

13. Still, a lot remains to be done – Building best practice skills at local banks (2/2) • Initiatives • Key milestones ahead • Expected time horizon 3 • Creation of excellent credit capabilities for new Gumhouria and NCB • Implement the new credit platform at overall bank level • Complete roll-out for the 2 banks: end-2008 • Need for • Strong commitment from Central Bank and commercial banks • Complete buy-in from all stakeholders in the country • Continuous support from providers of best practices in designing, rejuvenating and implementing the various initiatives 4 • Upgrade of HR skills • Implement sector wide training program • Implement new HR processes in banks • Results to be gradually visible throughout 2008 5 • Split NBC into two entities: operating bank and recovery vehicle • Set up the split (due diligence of NPL) • Identify the most viable strategic option for the operating bank • Set up the recovery vehicle • Set up of the recovery vehicle to be completed by the beginning of 2009 • Identification and implementation of the strategic option for the operating bank to be done by 2008 (e.g., full turnaround) 6 • Turnaround of the Specialized Banks • Set vision (overall and per bank), priorities and a master plan • Implement the master plan • Complete master plan by the end of 2008 Only an advisory role for the Central Bank

14. Still, a lot remains to be done – Establishing an excellent infrastructure • Initiatives • Key milestones ahead • Expected time horizon 7 • Building of new National Payments System • Successful pilot of core banking system (CBS) implementation • Completion of NPS and CBS by end of 2008/begin of 2009 8 • Ensuring best-practice supervision • Launch of initiative • To be completed by end 2008 To be reviewed by CBL 9 • Implementing CBL modernization • Launch of initiative • To be completed by end 2008 10 • Introduce a new Credit Bureau • Launch of the new Credit Bureau • Pilot on all Commercial Banks (but NBC) by April 2009

15. 8 The potential benefits are huge – example credit • 2006 • Potential if 50% of the gap is closed • 100 • Loan/deposit ratio • Additional loan/banking volume of LYD 6 billion • Strong increase of economic activity • Higher living standards of Libyan population through more investment and consumption • Non perform-ing loans/total loans • Reduction of NPLs by ~LYD 300 million** • Libya • MENA* region * Middle East and North Africa ** “Cross effects” of higher loan volume not considered

16. Career opportunities for managers • Reform program in the banking sector • Overview of Libya and its banking sector Agenda

17. 500 Key players involved in the Libyan public banking system • Mission statement/ announced strategy • Key financials • 2007, USD million • Ownership and size • Mission: To maintain monetary stability in Libya and to promote the sustained growth of the economy in accordance with the general economic policy of the State • Shareholders • Government of Libya: 100% • Board of Directors chaired by Governor • 2,000 employees • Assets • 93,638 • Loans • 2,821 • Capital & Reserves • 817 • Achieve a service level at international standards • Be the preferred bank for Libyan retail clients, and SME/ corporate clients with business in Libya • Be the preferred place to work among Libyan banks • Shareholders • Central Bank of Libya: 100% • Board of Directors with independent chairman • 146 branches • 5,900 employees • Assets • 9,699 • Loans • 2,811 • Capital & Reserves • 312 • Vision: Become the Bank of “trust & security” developing strong competence in the SME segment in parallel to the current focus on the public sector and its employees • Shareholders • Central Bank of Libya: 100% • Board of Directors with independent chairman • 61 branches • 2,450 employees • Assets • 3,912 • Loans • 1,056 • Capital & Reserves • 122

18. 1 • Entrepreneurship – has shown ownership and responsibility in developing new business structures 2 • Leadership – inspires colleagues, facilitates group work through coordination, strives to develop others to their full potential 3 • Results orientation – regularly over-delivers on agreed-upon targets, pragmatic work approach 4 5 6 • Professional behavior – high work ethic, honors all commitments, respectful of others • General banking knowledge – insightful of key business functions, expert in banking industry • Arabic and English knowledge – fluency in speech, native proficiency in writing The opportunity for managers from abroad • Desired profile – demonstrated excellence along 6 dimensions • The Central Bank of Libya and its partner institutions Gumhouria and NCB are seeking to attract a group of talented and experienced individuals from abroad, with the twofold objective of: • Assuming top management roles and leading the institutions to reach their business objectives • Tutoring their staff in up-to-date banking practices and developing the future leaders of the country's financial sector

19. 22 Summary of top management hiring demand at CBL, NCB and Gumhouria • Institution • Open positions • Possible compensation package for top management positionsUS$ • CSO • CFO • COO • CCO • NCB • Yearly net salary: internationally competitive • Incentives: 30% of salary • Yearly benefits • Car: ~10,000 • Accommodation: ~20,000 • Health: ~10,000 • Relocation expenses: ~10,000 • CSO • CFO • COO • Gumhouria

20. The value proposition for managers from abroad • Entrepreneurial • Developmental • The manager joins a major reform program, assuming a role of great responsibility and enjoying a high degree of autonomy • Entrepreneurship is valued as a key success factor • In building up the new financial system, managers get substantial exposure to the leaders of the country’s and the international financial community • There are strong development opportunities for one’s career • Meritocratic • Rewarding • Since its inception, the reform program has engendered a strong culture of performance, that ensures the high quality and strong capabilities of coworkers • Compensation includes: • High base salary • Large variable component • Comprehensive package of benefits

21. The Central Bank of Libya would like to hear from you! • If you are excited by the potential in Libya … • Find out more about the Bank at www.cbl.gov.ly • Contact Faisal El Gajiji at f_elgajiji@cbl.gov.ly • Contact Marc Stephens at Marc_Stephens@opencities.co.uk • Send in an application and have an initial interview by telephone with the HR team at the Central Bank • … and have the necessary skills and experience

22. Back up slides

23. Chief Sales Officer (CSO), NCB 2,273 Role • Chief Sales Officer Major respon-sibilities • Heads the bank sales network including all branch-level sales staff • Fully responsible for the commercial results of the bank • Builds individual and corporate customer segment departments focusing on marketing and product development • Oversees marketing campaigns, new product initiatives and the development of non-branch sales channels • Champions a new sales and service culture within the bank, supported by a new performance management system Requirements • Strong leadership skills (i.e. motivating, guiding and managing people) • Significant experience in leading a sales network and applying an effective performance management system • Excellent knowledge of retail banking a must, knowledge of corporate banking desirable 22

24. Chief Finance Officer (CFO), NCB 2,273 Role • Chief Finance Officer (CFO) Major respon-sibilities • Responsible for building up a new finance division • Directs auditing, recordkeeping and accounting activities of NCB • Makes recommendations relating to budget preparation, profit forecasts and operational changes • Develops and implements fiscal plans and policies • Oversees the financial functions of the institution • Delivers financial and management reports to board and senior management • Provides guidance regarding investment decisions • Oversees treasury activities • Manages relationship with supervision, regulators and other entities Requirements • Excellent corporate finance and strategic planning skills including hands-on experience in formulating business strategies and developing strategic business plans and forecasts • Excellent analytical skills • Good accounting knowledge 23

25. Chief Operating Officer (COO), NCB 2,273 Role • Chief Operating Officer (COO) Major respon-sibilities • Provides general direction and supervision to operations and administrative departments, including the personnel and staff functions • Ensures operations division acts as service provider for business units • Develops and implements operating policies and procedures • Analyzes operational problems and develops procedures for their resolution • Recommends equipment changes and reviews, and approves equipment expenditures • Monitors and ensures efficient operation of data processing and other technical services Requirements • Excellent leadership skills (i.e. motivating, guiding and controlling people) • Extensive proven background in operating procedures, including technical operations • Strong service mindset with regard to business units 24

26. Chief Credit Officer (CCO), NCB 2,273 Role • Chief Credit Officer Major respon-sibilities • Supervises the regional credit departments • Oversees all aspects of credit provision, and controls credit risk exposure • Has overall responsibility for bank risk • Ensures compliance with banking legislation • Evaluates and approves credit applications in his competence according to facility value • Checks proposals for new/modified credit products to ensure risk compliance • Supervises the bank credit activities and coordinates demands of the bank credit department Requirements • Excellent knowledge of credit risk theory and relevant regulatory provisions • Hands-on experience implementing credit risk processes in retail banks 25

27. 2,273 Chief Sales Officer (CSO), Gumhouria Role • Head of Sales / Commercial Banking (Chief Sales Officer) Major respon-sibilities • Heads the sales network including all of the branches • Fully responsible for the commercial results of the bank • Builds customer-segment-focused marketing and product teams • Oversees the design of marketing campaigns, new product initiatives and the development of non-branch sales channels • Champions a new sales and service culture within the bank, supported by a new performance management system Requirements • Strong leadership skills (i.e. motivating, guiding and managing people) • Significant experience in leading a sales network and applying an effective performance management system • Excellent knowledge of retail banking a must, knowledge of corporate banking desirable

28. 2,273 Chief Finance Officer (CFO), Gumhouria Role • Chief Finance Officer (CFO) Major respon-sibilities • Directs auditing, recordkeeping and accounting activities of the financial institution • Makes recommendations relating to budget preparation, profit forecasts and operational changes • Develops and implements fiscal plans and policies • Oversees the financial functions of the institution • Directs and supervises development, production, promotion and sale of products and services • Presents reports to the Board of Directors and senior management • Provides guidance regarding investment decisions Requirements • Excellent corporate finance and strategic planning skills including hands-on experience in formulating business strategies and developing strategic business plans and forecasts • Excellent analytical skills • Good accounting knowledge