Financial Crime World

Central Bank Board of Governors Exercises Extensive Powers to Regulate Oman’s Financial Sector

The Central Bank’s Board of Governors has been granted a wide range of powers to ensure the stability and soundness of Oman’s financial sector.

Authorizations and Delegations

According to Article 14 of the Sultanate’s Banking Law, the Board of Governors is authorized to:

  • Select, designate or employ officials, employees, advisors, special experts, or consultants necessary for the proper functioning of the Central Bank
  • Delegate powers and duties to these individuals as needed

Reserves and Currency Control

The Board also has the authority to:

  • Determine the level of reserves required by licensed banks against deposits or other reserves
  • Adjust such requirements within set limits
  • Promulgate regulations related to currency control, including:
    • Limitations on foreign currency holdings
    • Interest rates for non-resident accounts
    • Restrictions on foreign transfers
  • Establish rules regarding the amount and nature of foreign currencies and securities held by licensed banks

Deposit Insurance and Banking Regulations

The Board is responsible for:

  • Establishing a legal framework for deposit insurance
  • Issuing necessary regulations and rules
  • Enforcing banking regulations generally

Committees and Interest Rates

To ensure the effective functioning of the Central Bank, the Board can:

  • Form committees to consider matters referred or delegated to it
  • Establish rates of interest on time and demand deposits
  • Establish interest rates charged for loans or credit extended by licensed banks

Residual Authority

The Board’s powers extend beyond these specific areas, with Article 15 granting it residual authority necessary for the proper administration of:

  • The Central Bank
  • Currency issuance
  • Regulation of banking institutions

Penalties for Banking Regulators

In cases where a bank becomes undercapitalized, the Central Bank can impose:

  • Fines
  • Cancellation of its license to conduct banking activities Shareholders are not required to provide additional liquidity in such situations, but banks must balance their capital to meet Basel III standards.

Rules on Bank Ownership

Licensed banks are prohibited from making changes to their organizational structure or operations without prior approval from the Central Bank’s Board of Governors. This ensures that:

  • The regulator is informed of any significant changes
  • Can assess their impact on the bank’s stability and soundness

Additionally, the reorganization and change in control of licensed banks must be approved by the Central Bank, ensuring that such changes do not compromise the stability of the financial system.

Conclusion

The extensive powers granted to the Central Bank’s Board of Governors are designed to ensure the stability and soundness of Oman’s financial sector. The regulator is empowered to take swift action in response to any challenges facing the banking industry, including undercapitalization or changes in bank ownership. By exercising these powers effectively, the Central Bank can maintain public trust in the financial system and promote economic growth in the Sultanate.