Board of Governors Empowered to Oversee Central Bank’s Functions
The Board of Governors has been vested with significant powers and responsibilities to ensure the effective functioning of the Central Bank of Oman (CBO).
Selection, Designation, and Employment of Officials
According to Article 14 of the CBO Law, the Board is authorized to select, designate or employ officials, employees, advisors, special experts, or consultants necessary for the bank’s proper functioning.
Reserve Requirements and Currency Control
The Board has the power to determine the level of reserves required by licensed banks to be maintained with the Central Bank. This decision can be made with a two-thirds majority vote at a meeting of all members present. The Board is also empowered to promulgate regulations related to currency control, including:
- Limitations on foreign currency holdings
- Interest rates
- Restrictions on foreign transfers
Regulatory Framework for Licensed Banks
The Board has the responsibility to establish a legal framework for deposit insurance and issue necessary regulations and rules for this purpose. Additionally, it can regulate the amount and nature of foreign currencies and securities held by licensed banks, as well as procedures for trading in these instruments.
Representing Oman in International Financial Agencies
The Board represents the Government of Oman in international financial agencies when designated by His Majesty the Sultan. It also has the power to appoint representatives or participate in the activities of other central banks or international financial organizations.
Residual Powers
In addition to its specific powers and duties, the Board has residual authority necessary for the proper administration of the Central Bank, issuance of currency, and regulation of banking institutions in Oman. This power is exercised in accordance with the objectives of the CBO Law and without conflicting with other laws of the Sultanate.
Penalties for Non-Compliance
The banking regulators have various penalties at their disposal to ensure compliance with regulations, including:
- Fines
- Suspension or cancellation of a bank’s license to conduct banking business
If a bank becomes undercapitalized, it is obliged to balance out its capital to the extent required by the CBO, and failure to do so may result in fines or revocation of its license.
Bank Ownership Rules
The CBO Law regulates reorganization and change in control of licensed banks. No licensed bank can amend its constitutive contract or articles of incorporation without obtaining prior approval from the Board of Governors. The law also requires licensed banks to comply with Basel III standards on capital adequacy since January 2018.
Capital Adequacy Requirements
Licensed banks are required to maintain a minimum level of capital adequacy, and failure to do so may result in fines or cancellation of their license. The CBO has issued guidelines for composition of capital disclosure requirements (CP-2) to ensure compliance with Basel III standards.