Financial Stability in the Sultanate of Oman
The international upgrade of the Financial Stability Board (FSB) from the existing Financial Stability Forum (FSF) during the London Summit on 2 April 2009 of the G-20 leaders signaled the importance of financial stability as a practice to safeguard financial systems from potential downturns. The advancement brought coordination at the international level between the works of national financial authorities and international standard setting bodies towards effective regulatory, supervisory and other financial sector policies in financial stability.
The Banking Law 2000 had promulgated Central Bank of Oman (CBO) “to ensure maintenance of financial stability”. In line with international best practices, the notion of Financial stability was granted higher significance in the Sultanate when CBO formed an independent Financial Stability function in 2011. Its Financial Stability Report (FSR) provides guidance to regulators, government and market participants with the objective to recognize vulnerabilities and safeguard infrastructure, institutions, and different aspects encompassing the Omani financial market. At present, a micro and macro prudential regulatory and supervisory framework is in operation. The progressive migration to an improved supervisory regime, Risk Based Supervision (RBS) in the on-site examination framework stands completed. The process of adherence to international revised capital and liquidity norms is in place. The Financial Stability Department (FSD) conducts regular monitoring and analysis of systemic risks with view on the financial-economic system and international possibly influential factors. Further, a dedicated Joint Financial Stability Committee was formed to assist in shaping the financial-economic regulatory philosophy of maintaining stability in Oman. The Committee is chaired by the Executive President of CBO, with the Executive President of the Capital Market Authority as Vice Chair and other senior representatives from relevant governmental entities. The objective set to strengthen financial regulatory coordination and create a surveillance framework that can monitor and report on market trends and financial stability related issues.
Over the same road map, a new Anti-Money Laundering Law was promulgated, Bank Resolution Framework was formulated, and policies to improve Financial Inclusion were introduced. Furthermore, guidelines on Sound Compensation Practices, Correspondent Banking Relationships, and adoption of IFRS 9 were issued. Oman is also on track with its implementation schedule of Basel III capital and liquidity standards. Relatidly, the Sultanate has renewed its diversification efforts and the performance of nonhydrocarbon GDP reflects these efforts provide further support to the financial sector robustness and against potentially negative effects on financial stability. Similarly, the banking stability index evidences that Oman’s banking sector stability is intact as it remains well capitalized, profitable, and fairly liquid with a low infection ratio.