Financial Crime World

Oman’s Financial Regulation: Strengthening Prudential Norms to Ensure Stability

Introduction

In a move to strengthen prudential norms and ensure financial stability in the Sultanate, the Central Bank of Oman (CBO) has introduced various regulations governing the banking sector. The new measures aim to limit foreign exchange exposure to 40% of Tier 1 capital, real estate exposure to 60% of net worth or all-time savings deposits, whichever is greater.

Key Regulations

  • 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
  • Borrowing from Banks Abroad: Capped at 300% of net worth with sub-limits for time-buckets
  • Investment Powers:
    • Shares: Restricted to 20% of net worth
    • Bonds: Restricted to 10% of net worth
    • Overseas Investments: Capped at 25% of the ceiling limitation
  • Underwriting Obligations: Limited to 20% of a bank’s net worth
  • Housing Loans: Capped at 15% of total credit
  • Other Personal Loans: Restricted to 35%
  • Tenors:
    • Non-housing personal loans: Maximum 10 years
    • Non-housing loans: Maximum 25 years

Emphasis on Customer Due Diligence and Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT)

The CBO has emphasized the importance of customer due diligence, requiring banks to identify and verify customers’ identities. The regulator has also updated its AML/CFT requirements in line with international standards.

Reactions from the Banking Sector

  • Senior Banker: “The CBO’s efforts to strengthen regulation are crucial for maintaining financial stability and ensuring the long-term viability of our institutions. We support these measures and will work closely with the regulator to implement them effectively.”
  • CBO Spokesperson: “We are committed to ensuring financial stability and preventing money laundering and terrorist financing. These regulations will help us achieve this goal while promoting a robust banking sector.”

Conclusion

Oman’s financial regulation is undergoing significant changes aimed at strengthening prudential norms and ensuring financial stability. The new regulations will help promote a robust banking sector while preventing money laundering and terrorist financing.