In early December, the Central Bank of Libya (CBL) bought an additional 17.72% stake in the Bahrain-based Arab Banking Corporation (ABC) for an undisclosed sum. The stake, purchased from the Abu Dhabi Investment Authority (ADIA), takes the CBL's overall share in ABC up to 59.37%. The CBL started to build up its stake in ABC in March 2010, when it acquired ADIA's rights in ABC's US$1.1bn capital issue, which took its original holding up from 29.5% to 41.7%. The Kuwait Investment Authority is the bank's other principal shareholder, with 29.7%. ABC is Bahrain's second-largest offshore bank, with total assets of over US$26bn.

The acquisition was not wholly positive from a credit-rating perspective; two weeks later, Fitch Ratings downgraded the bank's short-term issuer default ratings (IDR) from F2 to F3, its long-term foreign-currency IDR from BBB+ to BBB, the rating on its senior unsecured debt from BBB+ to BBB and the rating on its subordinated debt from BBB to BBB-. The downgrade reflects Fitch's concerns that the CBL is not as robust a shareholder as ADIA, although Fitch maintained its outlook as stable, suggesting that it believes that there remains a "high likelihood" of support from its main shareholders, should the necessity arise.

Shortly after the CBL's acquisition, ABC itself purchased a 49% stake in Libya's Mediterranean Bank for US$60m, boosting its presence in Libya, where it has had a representative office since 1988. Given its stake in ABC, the CBL is in the slightly anomalous situation of granting regulatory approval for the deal, which is expected before the end of the first quarter of 2011. The deal continues a policy of increasing foreign presence in the banking sector. BNP Paribas (France) and Arab Bank (Jordan) have stakes in local banks and a joint-venture banking licence was awarded to UniCredit (Italy) in August.