Libya sought to form partnership with US bank-WikiLeaks

LONDON Thu Feb 24, 2011 9:38am EST

LONDON Feb 24 (Reuters) - Libya sought to invest in a major U.S. bank to form a strategic partnership at the height of the credit crisis in 2008 which engulfed the financial sector, a confidential diplomatic cable shows.

The cable dated July 21 2008, obtained by WikiLeaks, reveals the depth of oil-rich Libya's interest in the U.S. financial sector at a time when banks around the world reeled from losses in the deteriorating credit market.

It details operations of the Libyan Foreign Bank, which is owned by the country's central bank, based on meetings between the U.S. embassy staff in Tripoli and Mohammed Abdullah Bayt Almal, LFB chairman and former finance minister.

It also shows how Libya's sovereign wealth fund and other institutions tried to sell off U.S. assets.

"We had heard and reported previously that all Libyan government and financial institutions had divested themselves of holdings and accounts in the U.S. in response to potential seizure of assets," the cable reads.

"According to Bayt Almal, the LFB continues to hold U.S. dollar accounts and - despite efforts by the Libyan Investment Authority and other Libyan government entities to limit their exposure in the U.S. - is actively exploring the possibility of establishing a 'strategic partnership' with a major U.S. bank and investing in a U.S.-based bank."

LIA is the umbrella body for the country's sovereign wealth funds that manage oil windfall revenues. A separate confidential cable showed it had $32 billion in cash with several U.S. banks each managing up to $500 million. [ID:nLDE71N0PC]

The fund is estimated to manage assets of around $70 billion with stakes in European blue chips such as Italian bank UniCredit (CRDI.MI) and British publishing group Pearson (PSON.L).

The cable showed the government planned to significantly boost the coffers of LFB in 2008.

"A plan currently (is that central bank governor) Farhat Ben Gdara calls for a ten-fold expansion of the LFB's capital, from $1 billion to $10 billion. Conceding that LFB had aimed high, Bayt Almal said he would be happy with $6-7 billion, and expected to get it," the cable said.

LFB has capital of $2 billion as of 2009.

LFB owns nearly 83 percent of London-based British Arab Commercial Bank [BACBL.UL] and 98 percent of Bahrain-based Alubaf Arab International Bank. For a story on Libya and U.S. banks, see [ID:nLDE71N0PC]

For a FACTBOX of Libya's investments, see [ID:nLDE71K22M]

For an ANALYSIS on Libya's wealth fund, see [ID:nLDE71L1V0]

(Reporting by Natsuko Waki; Editing by Toby Chopra)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.