Underlining the complexity of managing the Gaddafi financial asset freeze on Friday, HM Treasury has carved out an exception for any traders dealing with ‘non-Libyan financial institutions’:
(H/T Natsuko Waki of Reuters)
Effectively it’s a licence to continue trading with British-Arab Commercial Bank, a London-based name active in short-term financing (letters of credit and so on) of trade in Arab markets.
Libya’s a big market, as it happens. And also a big stakeholder:
The Libyan Foreign Bank which holds 83.48 per cent is in its turn completely owned by Libya’s central bank.
Waki points us to Fitch’s recent downgrade of BACB to BBB- in addition, which has more interesting points on government ties:
BACB’s IDRs and Individual Rating reflect its comfortable liquidity and capitalisation, experienced management and its specialised franchise, but also its sensitivity to political and economic developments in a few key emerging markets and significant business concentrations. Funding consists almost entirely of deposits from banks and institutions in the MENA region, of which around three-quarters are from Libyan entities, mostly government or quasi-government. Deposits are mainly short term, but core deposits have historically been stable. Liquidity is managed conservatively and a high proportion of assets consists of interbank placements with western European and North American counterparties…
Quite a few Libyan central bank and sovereign wealth fund assets were held in bank deposits, remember — mostly in banks that are incorporated in Libya, it seems.
A good illustration of the problems with organising an asset freeze, particularly this issue of indirect but effective links to the Gaddafi family (already made plain in Libya’s sovereign wealth fund). The distinctions are not going to be cleared up for a while yet, and this clearly matters for the short-term letters-of-credit market.
In other ways the UK asset freeze is clearly biting, though. Here’s a James Bond-style story from the BBC, set in (ahem) Harwich:
Libyan currency worth £100 million has been impounded from a ship at Harwich, the Home Office has said.
The ship turned back from Tripoli and was accompanied into Harwich by HMS Vigilant and a UK Border Agency cutter…
Where and for what purpose was all that hard cash off to, we wonder?
Related links:
UK freezes Libyan wealth fund assets – FT
Contingent liabilities, letter of credit edition – FT Alphaville