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Central Bank Granted Sweeping Powers to Ensure Financial Stability
The Sultanate’s Central Bank has been granted far-reaching powers by the country’s lawmakers to ensure the stability and soundness of the financial system. The bank’s Board of Governors is now empowered to make key decisions that will impact the banking sector, including determining reserve requirements for licensed banks, promulgating currency control regulations, and establishing the legal framework for deposit insurance.
Key Powers
The Central Bank has been granted the following powers:
- Determining reserve requirements for licensed banks
- Promulgating currency control regulations, including:
- Limitations on foreign currency holdings
- Interest rates on non-resident accounts
- Restrictions on foreign transfers
- Establishing rules and regulations governing:
- Collateral and loan purposes
- Interest rates for deposits and loans
- Undertaking special projects and representing the government in international financial agencies
Residual Powers
The Banking Law grants the Board of Governors residual powers to perform all acts necessary for the proper administration of the Central Bank, issuance of currency, and regulation of banking institutions. This gives the board significant flexibility to respond to emerging issues and threats to financial stability.
Consequences of Undercapitalization
If a bank becomes undercapitalized, it is required to balance out its capital to the extent demanded by the Central Bank. However, if the bank fails to meet this requirement within the set timeframe, it could face:
- Fines
- Revocation of banking license
Rules on Bank Ownership
The Banking Law also sets rules for reorganization and change in control of licensed banks. Any changes to a bank’s organization or operation must be approved by the Central Bank prior to implementation. Additionally, no individual or group can own more than 10% of a licensed bank without prior approval from the board.
Conclusion
These powers and regulations are designed to ensure the stability and soundness of the financial system in the Sultanate, and demonstrate the government’s commitment to maintaining a robust and effective regulatory framework.