Central Bank’s Power to Regulate and Supervise Banks
The Central Bank of Oman has been granted extensive powers to regulate and supervise the banking industry in Oman. As outlined in Article 14 of the Law, the Board of Governors has the authority to:
Withdrawal or Suspension of License
- Withdraw or suspend the license of a bank if it fails to comply with directives or policies of the Central Bank or violates any provisions of the law.
- Impose sanctions on a bank for non-compliance or violations, including taking possession of the bank, administering it during suspension, and liquidating or reorganizing it when necessary.
Supervision Over Central Bank
- Exercise general administrative supervision over the Central Bank, its officers, and employees.
- Receive and review the annual report of the Central Bank, make recommendations to improve its effectiveness, and forward the report to His Majesty the Sultan with its recommendations.
Other Powers
- Select, designate, or employ officials, employees, advisors, special experts, or consultants necessary for the proper functioning of the Central Bank.
- Determine the level of reserves required by licensed banks to be maintained with the Central Bank and adjust such reserve requirements within the limits set by law.
- Promulgate regulations related to currency control, including limitations on foreign currency holdings, interest rates on non-resident accounts, and restrictions on foreign transfers of currency.
- Establish a legal framework for deposit insurance and issue necessary regulations and rules.
- Form committees within the Board of Governors to consider matters referred or delegated by His Majesty the Sultan, the Council of Ministers, or other designated officials.
Representation in International Agencies
- Represent the Government of Oman in international financial and monetary agencies and appoint representatives, committees, or participate in activities, proceedings, and negotiations of other central banks or international financial agencies.
- Promulgate regulations prescribing limitations on foreign currencies and securities held by licensed banks, procedures for trading in these instruments, and uncovered foreign exchange positions.
Penalties for Banking Regulators
The Central Bank has several penalties at its disposal to ensure compliance with banking regulations. These include:
- Withdrawal or suspension of a bank’s license
- Imposition of sanctions on a bank
- Taking possession of a suspended bank and administering it during suspension
- Liquidation or reorganization of a bank when necessary
Undercapitalized Banks
If a bank becomes undercapitalized due to a shortfall, the shareholders are not obliged to provide additional liquidity. However, the bank is required to balance out its capital to the extent required by the Central Bank’s Banking Regulations. If the bank cannot reach capital adequacy within the timeline set forth by the Central Bank, it could be fined or its license to conduct banking cancelled.
Rules on Bank Ownership
The Law also outlines rules on bank ownership, including:
- A licensed bank must obtain prior approval from the Board of Governors before amending its constitutive contract or articles of incorporation or effecting any change in its organization or operation.
- No person or group of persons acting individually or jointly may own or authorize the transfer of more than 10% of a licensed bank’s shares without obtaining prior approval from the Board of Governors.
These rules are designed to ensure that the banking industry is stable and secure, and that banks operate in a manner that is consistent with public interest.