Financial Crime World

Regulatory Requirements for Financial Institutions in Oman: A Glimpse into the Banking Law

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The banking business in Oman is governed by Article 5 of the Banking Law, which defines it to include activities such as receiving deposits, opening current accounts, extending credit, and exercising investment and merchant banking activities. However, not all financial institutions are subject to the same regulations.

Licensing Requirements for Banks

According to Article 52 of the Banking Law, only licensed banks can engage in banking business, while other financial institutions may be regulated by recognized regulators under other laws of the Sultanate. This distinction is crucial, as Article 50 prohibits any person or entity, except for a licensed bank, from using the words “bank” or “banking” in their name or by implication.

Requirements for Obtaining a License

To obtain a license to operate in Oman’s banking sector, applicants must meet certain regulatory requirements, which are governed by the Banking Law and regulations issued by the Central Bank. These requirements include:

  • Ownership structure
  • Fit and proper criteria for significant owners, directors, and senior management
  • Operating and strategic plans
  • Risk management and control functions
  • Capital, business, and financial projections
  • Strength

Investment Banking Activities

Interestingly, commercial banks in Oman are also permitted to engage in investment banking activities if they obtain explicit licenses under Regulation BM/REG/38/04/94. This highlights the country’s commitment to promoting a diverse range of financial services within its borders.

Material Changes to Licensed Institutions

Furthermore, material changes to the basis on which a license is granted require prior approval from the Central Bank. These changes include:

  • Amendments to articles of association
  • Changes in paid-up capital
  • Significant changes in ownership and control
  • Mergers and consolidations

By ensuring that all licensed institutions comply with these requirements, the Central Bank can maintain stability and confidence in Oman’s banking sector.