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البنــك المركــــزي العمـــاني Central Bank of Oman
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Annual Bankers’ Meeting – 2017https://cbo.gov.om/speech/35/21/2017 8:00:00 PMAnnual Bankers’ Meeting – 2017<p>I am extremely delighted to welcome you all to this 2017 edition of the Annual Bankers’ Meeting. The significance of this forum is getting reinforced every year as we move along the path of progress in the financial sector. I am sure, today’s meeting will contribute further to our collective wisdom and we will be better equipped to meet the ever growing challenges on our way. </p><p>It is heartening to note that the International Monetary Fund (IMF), in its April 2017 review, has forecast the world output growth rate to be 3.5% in 2017 compared with 3.1% in 2016. There are, however, uncertainties contributing to a net downside risk to the above forecast. These uncertainties emanate essentially from potential changes in the policy stance of the United States, progress in BREXIT and other geopolitical risks including a range of non-economic factors. The continued low oil prices also cast its shadow on the macroeconomic situation. The challenges may be many, but our preparedness to meet any eventuality must be robust and reliable. </p><p>I am glad that we have issued guidelines on implementation of IFRS 9 well in time after wide consultations with banks and the auditing fraternity. This is one area where I would urge all banks to exercise conservatism and pursue diligence of the highest order in adopting loss estimation models. I sincerely hope that the staff in the banks are being equipped in this regard with appropriate training and orientation. </p><p>Considering the overall macro-economic challenges, we have fine-tuned some of our regulations during the last one year. The intention has been to dovetail our regulatory approaches to meet the changing risk dynamics. As you are aware, after due deliberation we have consciously reduced the ceilings on credit exposures to non-residents and placement of bank funds abroad. We have also increased the minimum risk-weight applicable to exposures on other sovereigns and central banks irrespective of their ratings. These changes are of national interest and have come into effect from January 01, 2017. The above changes may perhaps require banks to reorient their businesses as they work in compliance. Banks must demonstrate strict compliance in letter and spirit with all the regulations. Representations received from banks seeking wide ranging regulatory forbearances to Central Banks’ instructions and routinely joining issue with onsite examination findings indicate that the banks do not fully appreciate the overall stabilizing and prudential objectives of our regulations. I urge upon the assembled senior bankers and also their respective Boards to live up to the Central Bank’s expectations and exercise necessary prudence and caution in this regard. </p><p>Some of the regulatory changes brought about during the year intend at extending calibrated concessions to banks so as to ensure uninterrupted flow of credit to the productive sectors of the economy. Based on the feedback that commercial entities are facing difficulties in honouring their loan/interest commitments to banks/FLCs following delay in receipts for the work executed and services rendered by them in respect of government related projects, we have, in September 2016, allowed an additional period of 90 days for classification of the accounts. On a review, we have extended further forbearance to eligible loans in January 2017 if they have underlying receivables from government owned entities, backed by the latter’s specific acknowledgement / undertaking. </p><p><br>I hope that the banks have been carefully extending the facility of restructuring to viable borrowers, who are facing temporary stress due to macroeconomic difficulties, and these borrowers will come back to good health with banks’ support. We have, however, acted upon the feedback that provisioning requirements on restructured facilities have been adding to the burden of the borrowers. While prudence demands additional provisioning in restructured facilities, we have tried to ease the burden by striking a balance. Banks have been allowed to hold specific provisions on a portfolio basis for the restructured facilities from the year 2016, and gradually increasing the provision level to 10% in 2017 and 15% in 2018. </p><p><br>Let me make it clear that the above regulatory concessions are purely temporary and are aimed at meeting the special situation of the day. Banks should therefore ensure that the concerned <br></p>