CBO implements policy measures to strengthen Oman’s banking sector

MUSCAT, DEC 10 – The Central Bank of Oman (CBO) has introduced a number of policy measures aimed at easing the challenges faced by borrowers while at the same time safeguarding the banking sector, Tahir Salim al Amri, (pictured) Executive President, announced here yesterday.

Speaking at the inauguration of the Banking & Finance Conference and Expo, which opened at Sundus Rotana Muscat, Al Amri said the new guidelines were part of a slate of initiatives designed to buttress the sector’s ability to meet the credit needs of the local economy amid continuing fiscal challenges posed by economic downturn triggered by the slump in global oil prices.

“The specific provisions on restructured loans have been allowed to be implemented in a phased manner with 5 per cent for the first year 2016, 10 per cent by the year 2017 and 15 per cent by the end of 2018,” Al Amri said. “Nevertheless, we have now embarked on a quick study with the goal of re-evaluating such measures to enable the banking to be agile and make rational decisions in this regard,” he stated in one of his first public engagements as the new Executive President of Oman’s apex bank.

Listing other policy measures initiated by the CBO in recent times, Al Amri said the Liquidity Coverage Ratio (LCR), along with associated disclosure requirements, have been implemented in banks to ensure the short-term resilience of their liquidity risk profile.
Likewise, the Net Stable Funding Ratio (NSFR) mooted as part of Basel Committee recommendations will become effective from January 2018 with a minimum ratio of 100 per cent to promote funding stability, he said. Guidelines for the implementation of IFRS-7 accounting standards have been issued as well, he noted.

“All these policy measures will ensure that the banking sector in Oman continues to be robust and support economic activities by providing legitimate credit to all segments of the economy,” the Executive President stated.
Leading figures from Oman’s banking and financial sector attended the official opening of the two-day conference and expo, which has been organised by Trifoil Expo in partnership with Tafani Events & Research.

In his address, the Executive President also reiterated the Central Bank’s commitment to ensuring that small and medium enterprises (SMEs) continue to obtain their credit needs from local banks. “The CBO has advised banks to be considerate with regard to credit delivery to this sector and mandated a formal credit target of 5 per cent of the banks’ total credit. Banks have also been permitted to reckon non-funded credit, up to a maximum of 1 per cent of total credit, under the overall target to ease constraints faced by SMEs,” he said.

Earlier, Al Amri acknowledged that the economic slowdown had adversely impacted the banking sector, which witnessed a deceleration in both growth of deposits and credit. Growth in bank credit decelerated from 11.2 per cent in 2015 to 10.1 per cent during 2016, declining further to 5.7 per cent during the January – September period of 2017.

“Nonetheless, I must underline that the banking sector has displayed resilience, reflecting the sound policies and judicious practices being followed by banks.

The banks in Oman have remained well capitalised as reflected by the Basel capital adequacy ratio at 16.8 per cent.
At the same time, the quality of banking assets did not witness any significant deterioration, and the delinquency rate went up just marginally from 1.9 per cent in 2015 to 2.1 per cent during 2016,” he added.


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