| Statement on Bank Deposits Protection Law | | | 10/17/2024 10:00:00 AM | Statement on Bank Deposits Protection Law | Within the framework of developing the banking sector in the Sultanate of Oman and keeping pace with the latest advancements, and in furtherance of the continuous efforts to maintain a healthy and robust financial sector | <p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">Within the framework of developing the banking sector in the Sultanate of Oman and keeping pace with the latest advancements, and in furtherance of the continuous efforts to maintain a healthy and robust financial sector, Royal Decree No. (47/2024) has been issued promulgating the Bank Deposits Protection Law, which is based on protecting deposits in the event of the default of one of the banks or financial institutions licensed by the Central Bank of Oman to receive deposits. The Law is considered an integral part of the financial safety network in the Sultanate of Oman.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The Bank Deposits Protection Law also underscores the role of CBO in achieving and enhancing financial stability through banking laws, circulars, rules, guidelines, controls, supervision, and other functions. Considered an additional safety net in the event of a bank's default and thus works to stabilize the banking sector, the Bank Deposits Protection Law aims to protect the interests of “small depositors", who are the most vulnerable in the event of bank failure, by establishing a fast-track, effective compensation system, and boosting confidence in the banking system.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The main objectives of protecting bank deposits include:<br></span></p><ul style="text-align:justify;"><li><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">providing a comprehensive protection cover on members' deposits to encourage savings.</span></li><li><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">Enhancing confidence in the soundness of the financial position of the banking sector in the Sultanate of Oman.</span></li><li><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">Minimizing the effects of systemic risks in the banking sector.</span></li></ul><div style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3"><br></span></div><div style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">Furthermore, the Law provides a comprehensive protection cover for specific deposits with banks operating in the Sultanate of Oman. The Law also aims to compensate depositors without any delay, especially those with relatively small savings, until their financial liabilities are paid in full, which means that the system will work to bridge the financing gap while the legal procedures to liquidate the bank take their course. It is noteworthy that CBO supervises the system, which is considered an independent protection system based on specific rules, from both the administrative and financial aspects.</span></div><div style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3"> </span></div><div style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The Bank Deposits Protection Law consists of (31) Articles. Its </span><strong class="ms-rteThemeFontFace-1 ms-rteFontSize-3">main provisions are the establishment of two independent funds, namely the Takaful Fund for the Protection of Deposits with Licensed Islamic Institutions, and the Insurance Fund for the Protection of the Deposits with Licensed Conventional Institutions.</strong><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3"> The management and investment of each fund was taken into consideration as per its requirements and classification. The Takaful Fund for the Protection of Deposits with Licensed Islamic Institutions requires compliance with the provisions of Islamic Sharia, whether in managing its affairs or investing its funds, including the need to subject the operation of this fund to Sharia audit by independent auditors appointed by CBO's Board of Governors. In addition, the types of deposits that enjoy protection have been determined, whether through conventional or Takaful insurance, while giving the necessary flexibility to CBO in introducing new types of deposits. The contribution rates imposed on members and how they are calculated have also been determined to ensure flexibility and the ability to cope with situations that may arise in the banking sector, along with considering the procedures related to compensating depositors in both funds, including the amount of determined compensation, how it is calculated, and the right to appeal it.</span></div><div style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3"><br></span></div><div style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">Moreover, the Bank Deposits Protection Law is imposed on all banks (conventional and Islamic) licensed by CBO and operating in the Sultanate of Oman (local or foreign) and authorized to retain public deposits and register their membership in the system. </span><strong class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The Law states that it is not required from depositors to register their deposits, as this is automatically available to all depositors of those deposits that are due and eligible for coverage by the system and with zero fees.</strong></div><div style="text-align:justify;"><strong class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The Bank Deposits Protection Law also sets the current compensation amount at OMR 20,000/-, as a maximum for eligible deposits whose value exceeds OMR 20,000/-. Deposits of OMR 20,000/- or less are fully compensated.</strong><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3"> Concurrently, the law specifies the deposits held in the Sultanate of Oman that are due and eligible for compensation, such as savings deposits, current accounts, call deposits, time deposits, government deposits, deposits of trust funds and pension funds, or any other deposits of similar nature, and any other deposits determined by CBO.</span></div><div style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3"><br></span></div><div style="text-align:justify;"><strong class="ms-rteThemeFontFace-1 ms-rteFontSize-3"></strong><strong class="ms-rteThemeFontFace-1 ms-rteFontSize-3">In addition, the Law states that if a depositor has several accounts with the same defaulting bank, the amounts deposited to him/her in all accounts eligible for coverage by the system are collected to calculate the compensation amount. All deposits eligible for coverage by the system for the same depositor in several banks will be dealt with independently, so that the depositor is entitled to receive a maximum of OMR 20,000/- from each bank</strong><strong class="ms-rteThemeFontFace-1 ms-rteFontSize-3">.</strong></div><div style="text-align:justify;"><strong class="ms-rteThemeFontFace-1 ms-rteFontSize-3"><br></strong></div><div style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">If the eligible deposit account is shared between two or more depositors of the affected member, the compensation amount is distributed among them in proportion to each of their share in the account. If their shares in the account are unspecified, they are considered equal, provided that the total amount received by a single depositor does not exceed the upper limit of the specified compensation amount under this Law and the regulations and decisions issued in implementation thereof if he/she has one or more other eligible deposit accounts with the same affected member. In other words, joint account holders are treated individually according to their share in the account for the purpose of compensation, provided that the total amount received by one person does not exceed the maximum compensation amount.</span></div><div style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3"><br></span></div><div style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3"> </span></div><div style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">In accordance with the Bank Deposits Protection Law and Regulations, the defaulting member bank must submit to CBO a list of amounts due for payment, in line with the procedures determined by CBO from the date of issuance of the decision to stop the bank from practicing banking business. Each depositor is notified of the net amount due to him/her. CBO's Board of Governors then determines the method and date of payment to depositors, and the payment will be made as soon as possible. The depositor obtains the amount of compensation due to him/her under this law after submitting a request to CBO in which he/she acknowledges his/her assignment to the fund of the amounts owed to him/her by the affected member, within the limits of the amount of compensation he/she obtained from the fund. In the event of the liquidation of a bank, </span><strong class="ms-rteThemeFontFace-1 ms-rteFontSize-3">depositors have the right to demand that the bankrupt bank pay the amounts of outstanding deposits that are not covered under the law. </strong></div><div style="text-align:justify;"><strong class="ms-rteThemeFontFace-1 ms-rteFontSize-3"><br></strong></div><div style="text-align:justify;"><span style="font-size:13pt;">If the depositor is not satisfied with the amount paid to him/her, he/she may submit a complaint to CBO within seven days from the date of receiving the amount scheduled for him/her or from the date of receiving notification that there are no dues to him/her, provided that this complaint is considered as soon as possible and no later than 30 days from the submission date. The decision of CBO will be final and binding regarding the depositor's entitlements.</span></div><div style="text-align:justify;"><span style="font-size:13pt;"><br></span></div><div style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">It is noteworthy that the amendment to the previous Law “Banking Deposits Insurance Scheme" occurred after amending the Banking Law issued under Royal Decree No. (114/2000), which allowed the practice of banking business in compliance with the provisions of Islamic Sharia in the Sultanate of Oman. Fully-fledged Islamic banks were licensed, together with all other banks. A number of conventional banks set up windows for Islamic banking, and accordingly the need emerged to provide the necessary protection and cover for Islamic deposits so as to boost the public's confidence, as well as to achieve equality and justice in the competition between Islamic banks and their conventional counterparts, whose customers enjoy protection cover that protects their deposits.</span><br class="ms-rteThemeFontFace-1 ms-rteFontSize-3"></div> | 0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900075E4FF44B3F64489802BE694C5C6FB70300A9BCF8A0432A87429120A5B0A0EDBFF9 | | |