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Oman Banks Face Stringent Regulations to Ensure Financial Stability

Muscat, Oman - The Central Bank of Oman (CBO) has implemented a range of regulations to ensure the stability of the financial sector in the country.

Capital and Liquidity Requirements

According to the new guidelines, foreign exchange exposure for licensed banks is limited to 40% of Tier 1 capital. Additionally:

  • Real estate exposure by loan or security value, whichever lower, shall not exceed 60% of the bank’s net worth or all-time and savings deposits, whichever is greater.
  • Borrowings from banks abroad are restricted to 300% of net worth, with sub-limits for time-buckets.

Investment Powers

The CBO has also set limits on investment powers in:

  • Shares: 20% of net worth
  • Bonds, notes, and other obligations: 10%
  • Overseas investments: limited to 25% of the ceiling limitation
  • Underwriting obligations: restricted to 20% of the bank’s net worth

Credit Limits

Housing loans for banks are capped at 15% of total credit, while personal loans are limited to 35% of total credit. Maximum tenors for non-housing personal loans and non-housing loans are set at:

  • 10 years
  • 25 years, respectively

Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT)

The CBO has emphasized the importance of AML/CFT initiatives and is committed to international efforts in combating money laundering and financing of terrorism. The Sultanate is updating its legal, institutional, and procedural requirements over time.

  • A separate AML/CFT Unit functions within the Banking Development Department of the Central Bank.
  • Licensed institutions are monitored and supervised through periodical reports and on-site examinations.

Anti-Money Laundering Law

The CBO has implemented a comprehensive Anti-Money Laundering Law (Royal Decree 30 of 2016), which sets obligations for applicable financial and non-financial entities, roles, and responsibilities of supervisory authorities, coordination within, and international cooperation.

Regulatory Framework

“The new regulations are designed to ensure the stability of the financial sector in Oman,” said a CBO spokesperson. “We believe that these measures will help to mitigate risks and protect the interests of our citizens.”

The CBO has also been subjected to the Financial Sector Assessment Program (FSAP) conducted by the International Monetary Fund (IMF) and World Bank, which observed that the regulatory regime largely complies with international standards.

Progress and Upgrades

However, the FSAP Mission identified certain areas where further progress could be achieved. The Central Bank of Oman seized the opportunity to examine all such proposals in a systematic manner by appointing a high-level committee to identify action points and follow up with their implementation.

In recent years, significant progress has been made in this regard, and the regulatory regime has been upgraded further substantially. Explicit authority was bestowed upon the Central Bank of Oman by suitable amendment to the Banking Law to adopt best international practices that could benefit the country in financial stability and economic progress.