Licensing of Financial Institutions
Article 5 (Defined Terms) of the Banking Law defines the banking business to include, among others, the operation of receiving deposits in the form of demand or time or savings deposits, the opening of current accounts, extension of credit, exercise of Investment and Merchant Banking activities, etc.
Article 52 of the Banking Law stipulates that no person shall engage in banking business unless granted a license by the Central Bank, though financial institutions, other than banks, may engage in activities falling within the definition of banking business other than receiving deposits, provided they are regulated pursuant to other laws of the Sultanate by a recognized regulator.
Article 50 of the Banking Law prohibits any person other than a licensed bank to use the word “bank” or “banking” in name or by implication.
Article 54 of the Banking Law mandates that each application for a license should be reviewed against meeting the regulatory requirements, commercial, financial and economic needs of the Sultanate, the objectives of the Law and such other factors as may be required by regulations of the Central Bank.
Licensing requirements and processes, accordingly, are governed by the relative provisions of the Banking Law, Regulations and Circulars issued to licensed institutions from time to time. Factors taken into consideration include the ownership structure/pattern, fit and proper criteria of significant owners, directors and senior management, operating and strategic plans and vision, risk management and control functions and capital, business and financial projections and strength.
Commercial Banks may undertake investment banking activities too if explicitly licensed under the Regulation BM/REG/38/04/94.
Material changes in the basis on which a license is given require prior approval of the Central Bank. They include amendments to Articles of Association, changes in paid up capital, significant changes in ownership and control, mergers and consolidations.