Home Opinions Liquidity crisis, who is responsible?

Liquidity crisis, who is responsible?

1189
0
SHARE
Internet

By: Suliman S. Al-Shahomy* 

The notion that banks capitals is used to pay deserved money for

Suliman S. Al-Shahomy
Suliman S. Al-Shahomy

owners of current accounts like salaries is untrue; banks only pay money when it enters accounts via transfers from bodies who pay salaries.

Banks depend on deposits, twirling those deposits in the form of other banking services like borrowing, credentials and others to accomplish revenues. But banks capital is used for basic bank expenditures, not paying money and salaries transfers. All banks are obliged by laws to pay depositors and accounts’ owners, if payments were not met, banks fall in a major trouble.

In Libya, banks don’t receive money from governmental bodies that pay salaries, subsequently, according to laws, banks are not meant to pay money unless received and deposited in cash via clearing mechanism and monetary settlement.

The problem is that most depositors withdrew their deposits from banks, hence, banks can’t by no means use money of other depositors to pay salaries, which were not transferred in cash from the government to banks. Such money, if used, would jeopardize the bank itself. And whatever the bank’s capital, it won’t be enough to pay one month salaries, not mentioning being illegal. Banks depend on what is called “Deposit Liabilities” which is money people and companies put, not the bank capital, as this capital is of the bank’s owners used to manage its activities not paying depositors money.

The problem is complex and complicated. We can simply say it is a confidence crisis among Libyan banks, because of weakened performance, lack of confidentiality and halt of banking services, as well the crisis inside the Central Bank of Libya (CBL), which apparently failed to resolve, not mentioning its division and floundering policies and procedures, and a government crisis that failed to perform its assigned tasks towards the country and citizens, in the light of unrivaled spread corruption.

*A Libyan Finance Expert and The Founder of Libyan Financial Market

Translated By LIBYAPROSPECT