Muscat: Oman’s banking sector remains in a fairly robust position underpinned by strong asset growth, and innovation through technology, which is enabling the industry to improve operational efficiency, augment revenue and reduce risk, and enhance customer experience, the first edition of the KPMG Oman banking perspectives report has revealed.
This is despite certain challenges that banks have had to face as a result of emerging technology and new regulations. To address these challenges, banks are exploring new solutions to grow and diversify their business, including harnessing artificial intelligence (AI), blockchain and FinTech to grow their bottom-line.
Emilio Pera, Partner and Head of Financial Services, KPMG Lower Gulf, said: “Banks in Oman seem to be operating in very dynamic times and the introduction of new laws and robust regulations is putting tremendous pressure on them to re-think their business model.”
“Furthermore, the proposed introduction of value added tax (VAT) is expected to impact profit margins, encouraging banks to harness technology to engage with customers in new and creative ways. In this context, the KPMG Oman Banking Perspectives 2018 report aims to be a valuable resource for the banking sector in the Sultanate as it looks to the next stage of growth and evolution,” he added.
Other regulatory changes such as the new International Financial Reporting Standards (IFRS) standards (9 and 16) and Basel III/IV developments continue to dictate how the sector will perform over the coming months.
The Central Bank of Oman (CBO) issued a circular laying down guidelines on the implementation of IFRS 9. While the new standards have already brought about far-reaching changes in many areas, existing IT systems are likely to be changed significantly to calculate and record the changes required by IFRS9 in a cost-effective and scalable way.
Meanwhile, as the 2017 Basel III amendments to credit and operational risk are likely to be implemented in Oman on 1 January 2022, the banking sector would do well to prepare for some impact on processes and regulatory capital provision.
“The future looks healthy for Oman’s banks. Many are already looking to harness technological developments and meet regulatory challenges by investing in a more enhanced customer experience,” Pera said.
“They are doing so by leveraging social media to engage with a younger generation of customers, and developing applications, such as mobile wallets and other enhanced digital products. Banks will have to remain innovative if they are to operate to their optimum over the next eight months,” he added.
Separately, KPMG also launched the GCC listed banks report for 2017, which analyses the financial results for leading listed commercial banks across the GCC. The report revealed that the Omani banking sector remained well capitalised and profitable in 2017, with the credit growth remaining healthy despite economic challenges. The report also found that the banking sector in Oman is playing an important role in supporting the economy by financing public and private sector projects, and assisting small and medium-sized enterprise (SMEs).