Libya has set regulations for its commercial banks to seek "strategic partnerships" with foreign banks, capping at 49 per cent the stakes foreign investors can own.

The measures are part of the Libyan central bank's strategy of reforming the country's banking system and improving its competitiveness, the central bank said in a directive sent to the heads of nine local banks.

The Tripoli government is struggling to reform the highly centralised banking system, which is widely seen as the main obstacle to growth, and to lure more private investment outside the oil and gas industry.

"The order number 19 requires of the banks which intend to seek foreign banks as strategic partners to abide by the conditions the strategic partner must meet and the limits of its participation in the capitals of the local banks," said the text of the central bank order.

"The proportion of the participation of the foreign bank in the capital of a local bank should not exceed 49 per cent ... The participation of the foreign partner should increase the capital of the local bank by at least LD70 million ($55 million)," it added.

The central bank also said any partnership agreement between a local bank and its foreign investor should provide for at least 90 per cent of the venture's employees to be Libyan nationals.

The central bank named the nine commercial banks to which the foreign investment order was addressed as Commercial and Development Bank, Trade and Investment Amen Bank, Arab Ijmaa Bank, Moutawassat Bank, Wafa Bank, Waha Bank, Unified Bank for Commerce and Investment, Arab Commercial Bank, Saraya Bank for Commerce and Investment.

Libya has a total of 19 banks, including four devoted to specific banking services like Rural Bank which focuses on microcredit, and the Savings and Real Estate Investment Bank specialising in banking services for real estate and housing, Libyan bankers say.

Libya sold 19 per cent stakes in two banks to two foreign banks in 2007 and 2008 and government officials said they wanted to assess what benefits the country's banking system would gain from these sales before deciding whether to expand the privatisation.

In March the central bank had said the government was planning to float at least 15 percent of Al Joumhouriya Bank on the local stock market and aims to grant licences for foreign lenders to enter Libya next year.

Joumhouriya (Republic), Libya's biggest state-owned bank by assets, has capital of more than LD1 billion ($799 million) after merging with another bank, Al Oumma (Nation) Bank.

Government officials have said they plan to give licences for foreign banks to launch operations next year, either alone or in partnership with Libyan investors. – Reuters