Regulatory Authority
The Central Bank of Oman (CBO), established by Royal Decree 114/2000, is the sole banking regulator and supervisor in Oman. The CBO’s regulatory mandate covers:
- Licensing of banks and financial institutions
- Prudential supervision (capital, liquidity, risk)
- Monetary policy (OMR-USD peg maintenance)
- Foreign exchange reserve management
- Consumer protection in financial services
- Anti-money laundering (AML) oversight for banks
The Capital Market Authority (CMA) regulates investment banks, broker-dealers, fund managers, and insurance companies separately.
Banking Law
The primary legislation is Royal Decree 114/2000 (the Banking Law) and its extensive implementing regulations and circulars issued by the CBO.
Bank licensing categories:
- Commercial banks: Full-service banking (deposits, loans, trade finance, treasury)
- Islamic banks: Full-service Islamic banking (Sharia-compliant products only)
- Specialised banks: Focused mandates (Oman Housing Bank for mortgage finance)
- Branches of foreign banks: Operating branches of internationally licensed banks (e.g., HSBC Oman, Citibank, Standard Chartered)
Capital and Prudential Requirements
The CBO has implemented Basel III capital adequacy standards, requiring banks to maintain:
Minimum capital ratios:
- Common Equity Tier 1 (CET1): 6% minimum (+ capital conservation buffer of 2.5% = 8.5% effective minimum)
- Tier 1 Capital: 8% minimum (+ buffers)
- Total Capital Ratio: 12.5% minimum (+ buffers)
- Domestic Systemically Important Banks (D-SIBs): Additional 1-2% surcharge for major banks (Bank Muscat, NBOB)
Liquidity requirements:
- Liquidity Coverage Ratio (LCR): Minimum 100% (high-quality liquid assets to cover 30-day stress outflows)
- Net Stable Funding Ratio (NSFR): Minimum 100%
Oman’s banking sector generally maintains capital ratios well above minimums — a source of systemic stability.
Islamic Banking
Oman permitted Islamic banking from 2012 — the last GCC state to do so. In the decade since, Islamic banking has grown to approximately 15-20% of total banking assets.
Islamic banking framework:
- Full Islamic banks: Bank Nizwa, Alizz Islamic Bank (merged into OAB)
- Islamic banking windows of conventional banks: Meethaq (Bank Muscat), Muzn (Bank Sohar), Maisarah (Bank Dhofar)
The CBO issues dedicated Islamic banking regulations (IAS circulars) covering Sharia compliance requirements, governance, and product standards. A Higher Sharia Supervisory Authority coordinates Sharia standards across all Islamic banking institutions.
Islamic banking products: Murabaha (cost-plus sale), Musharaka (partnership finance), Ijara (leasing), Sukuk (Islamic bonds), Takaful (Islamic insurance).
Fintech Regulation
The CBO operates a regulatory sandbox for fintech innovators — allowing technology companies to test financial products in a controlled regulatory environment before full licensing. The sandbox has attracted payment service providers, lending platforms, and digital banking applications.
Key fintech regulations:
- Electronic Payment and Digital Wallet Regulations: Framework for e-money and mobile payment services
- Open Banking Framework: Under development — would require banks to share customer data (with consent) with licensed third-party providers
- Digital banking licence: Framework under consideration for purely digital banks without branch networks
Foreign Bank Entry
Foreign banks may enter Oman through:
- Branch operation: Established foreign banks operating an Oman branch (HSBC, Citibank, Standard Chartered, others)
- Subsidiary: Separately capitalised Omani-incorporated subsidiary (rare)
- Representative office: For liaison only, no commercial operations
New foreign bank branch applications require CBO approval, minimum capital/guarantees, and home regulator endorsement.
AML and Compliance
Oman has implemented Financial Action Task Force (FATF) Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) requirements. The National Centre for Financial Information (NCFI) coordinates AML policy, while the CBO supervises bank-level compliance.
Oman is a member of the MENAFATF (Middle East and North Africa FATF) regional body and undergoes periodic mutual evaluations. Recent evaluations have noted progress in AML framework implementation with ongoing work required in beneficial ownership transparency.