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Oman Tightens Financial Regulations to Ensure Stability

The Central Bank of Oman (CBO) has introduced new regulations to ensure the stability of the country’s financial sector. The measures are designed to strengthen the banking system, improve risk management, and enhance customer protection.

Strengthening Banking System

  • Borrowings from foreign banks are restricted to 300% of a bank’s net worth
  • Investments in shares and bonds are capped at 20% and 10% respectively of a bank’s net worth
  • Underwriting obligations are also limited to 20% of a bank’s net worth

Loan Caps

  • Housing loans are capped at 15% of a bank’s total credit
  • Other personal loans are restricted to 35%
  • Maximum tenor for non-housing personal loans is 10 years, and 25 years for non-housing loans
  • Debt service ratio cannot exceed 50% and 60%

Risk Management

  • Adoption of international standards on customer due diligence, internal audit, and corporate governance
  • Islamic banking entities will be governed by a separate regulatory framework

Regulatory Measures for Finance and Leasing Companies (FLCs)

  • FLCs are required to maintain a minimum capital of RO 25 million
  • Limit outside liabilities to five times their net worth

Money Exchange Establishments

  • Minimum capital requirement: RO 500,000 for those involved in money changing and issuing drafts, and RO 15,000 for those only involved in money changing

Financial Stability Unit

  • Established by the CBO to monitor the financial system and identify potential risks
  • Works closely with other regulatory bodies to ensure stability and resilience of Oman’s financial sector

Combating Money Laundering and Financing of Terrorism (AML/CFT)

  • Country has updated laws and regulations to comply with international standards, including those set by the Financial Action Task Force (FATF)
  • Separate AML/CFT Unit established in the Banking Development Department of the Central Bank to focus on these issues

Customer Protection

  • Requirement for banks to maintain a minimum capital adequacy ratio
  • Disclosure of information about risk management practices

Conclusion

The new regulations aim to strengthen Oman’s financial sector, improve risk management, and enhance customer protection. The CBO will continue to monitor the financial system and make adjustments as necessary to ensure stability and resilience of Oman’s financial sector.