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Central Bank of Oman Introduces New Regulations to Enhance Financial Stability

Muscat, January 2018 - The Central Bank of Oman (CBO) has introduced new regulations aimed at enhancing financial stability in the country.

Key Regulatory Changes

The CBO has implemented several key changes to limit foreign exchange exposure and real estate exposure:

  • Foreign exchange exposure: limited to 40% of Tier 1 capital
  • Real estate exposure: limited to 60% of net worth or all-time savings deposits, whichever is greater
  • Borrowings from banks abroad: limited to 300% of net worth with sub-limits for time-buckets

Additionally, the CBO has imposed restrictions on investment powers:

  • Shares: limited to 20% of net worth
  • Bonds, notes, and other obligations: limited to 10%
  • Overseas investments: capped at 25% of the ceiling limitation

Other Regulatory Changes

The CBO has also restricted underwriting obligations to 20% of a bank’s net worth and limited housing loans to 15% of total credit. Non-housing personal loans are capped at 35% of total credit, with maximum tenors of:

  • 10 years for non-housing personal loans
  • 25 years for non-housing loans

Customer Due Diligence Requirements

The CBO has emphasized the importance of customer due diligence requirements, which have been a pre-requisite for banks in Oman since the beginning.

Combating Money Laundering and Financing of Terrorism

To combat these threats, the Sultanate of Oman is committed to international initiatives and has updated its legal, institutional, and procedural requirements over the period. The country is a founding member of the Middle East and North Africa Financial Action Task Force (MENA FATF) and has been subject to FATF and MENA FATF Mutual Evaluation.

The CBO has also established a separate Anti-Money Laundering and Combating Financing of Terrorism (AML/CFT) Unit, functioning in its Banking Development Department, for focused attention and interactions on the subject. Licensed institutions are monitored/supervised through periodical reports and on-site examinations.

Conclusion

In conclusion, the new regulations introduced by the CBO aim to enhance financial stability in Oman by limiting foreign exchange exposure, real estate exposure, and borrowings from banks abroad. The regulatory body has also emphasized the importance of customer due diligence requirements and combating money laundering and financing of terrorism.

Source: Central Bank of Oman