CBO issues several regulatory amendments

Muscat: As part of Central Bank of Oman’s (CBO’s) continuous efforts and contribution in the economic development in the Sultanate, the central bank has issued a number of regulatory amendments in order to create a boost the business environment in the financial sector.
The measures are expected to strengthen the capacity of banks operating in Oman to continue providing liquidity and granting credit to various projects, thus stimulating economic growth.
The CBO is eager in keep up to date with the latest international regulatory developments and in view of the macroeconomic challenges that lie ahead while maintaining the safety, and soundness of the banking system. The following amendments have been taken by the CBO.
The CBO has reduced the capital adequacy ratio (CAR) from 12 per cent to 11 per cent, which would result in increasing the banks’ lending capacity and reflect positively on overall credit growth. This change is expected to result in an increase in the volume of additional credit available to OMR7.8 billion from OMR5.2 billion.
The CBO in order to increase the ability of banks to lend, improve liquidity management efficiency in banks and to stimulate the interbank market, has decided to expand the deposit base by including local banks’ deposits, under which the current allowed rate of 87.5 per cent will provide greater liquidity in the market and will enhance overall credit growth.
As part of its efforts to implement the guidelines of the Basel Committee on Banking Supervision, the CBO has decided to remove the regulatory restrictions imposed on the risk weights to claims on sovereign and central banks.
In order to enable the banks to manage their liquidity gaps more efficiently, the CBO has decided to increase the prudential limit for all currencies from -15 per cent to -20 per cent for the 3 to 6 months buckets and negative -25 per cent for 6 to 9 months buckets and 9 to 12 months buckets. This would give banks more flexibility to utilise credit lines available to them with their foreign and local correspondents at a reasonable cost.
It was also decided by the CBO to increase the prudential limit ratio of credit exposure to non-residents and placement of banks funds abroad to banks' local net worth from 50 per cent to 75 per cent, which is expected to lead to greater flexibility for banks to manage their liquidity surpluses, diversify their revenues and increase their external borrowing capacity to finance local projects of national importance.
These directives are effective from April 1, 2018 as per the circulars issued by the CBO to all licensed banks in the Sultanate of Oman.