Attracting investments, including foreign direct investments, hold significant importance for the economy of every country. Regulatory frameworks for banks and banking practices play a crucial role in this regard.
Historically Omani banking sector was regulated by the Royal Decree 114 of 2000 ("Repealed Banking law") which has been replaced by the Royal Decree 2 of 2025 ("New Banking Law").
The New Banking Law is an evolution of the Repealed Banking Law building mainly on the principles prescribed under the latter. The changes in banking industry regulations are introduced mainly to bring the Omani banking industry at par with the international practices and standards in order to attract and facilitate investment in Omani economy.
Saliant features of the New Banking Law pertaining to banking governance and regulations which impacts investors are briefly discussed herein.
Scope of the Central Bank of Oman ("CBO")
Under the New Banking Law, the scope of the CBO has been expanded to include activities covering regulation, licensing, control and supervision of digital banks and investment banks. Further, the CBO has been given express authority to regulate and supervise financial institutions performing financial activities as per the Article 136 of the New Banking law.
Although the rules and regulations for digital banks are yet to be issued by the CBO, it is a positive development as it will foster investments and provide confidence to investors keeping in view the convenience and efficiency associated with digital banking.
Consumer Protection and Confidentiality
The New Banking Law places extensive stringent confidentiality requirements and penalizes unauthorized disclosure of client information, whereas the Repealed Banking Law provided protection against banking transactions in limited circumstances.
The New Banking Law also places obligations on banks to not unreasonably prevent a person or customer from becoming a customer of another bank or financial institution. It also prescribed that customers are provided with sufficient information regarding products and services and the terms and conditions are sufficiently clear and understandable by all. The licensed banks are now required to publish a price list of products and services it provides.
Th enhanced consumer protection and confidentiality requirements are prescribed under the New Banking Law to boost investor confidence and attract investments in Oman.
Capital Adequacy and Reserve Requirements
The New Banking Law has not affected the capital adequacy requirements per se; however, the thresholds have been increased substantially.
The minimum capital requirement for the CBO has been increased to OMR 1 billion from OMR 259 million. The minimum capital requirement for domestic banks has been raised to OMR 100 million from OMR 20 million and for foreign banks the new requirement will be as per the policies of the CBO instead of OMR 3 million under the Repealed Law.
Furthermore, the New Banking Law authorizes the CBO to set requirements for mandatory cash reserves and additional reserves for licensed banks and financial institutions in order to protect depositors. This will provide confidence to investors regarding the safety and assurance of their deposits in Omani banking industry.
Anti-Money Laundering Law
Anti-Money Laundering and Combating the Financing of Terrorism Law was promulgated vide the Royal Decree 30 of 2016 (the "AML Law"). The AML Law provides for strict compliance with its requirements to identify, report and penalize money laundering activities. Licensed banks and financial institutions,inter alia, are required to undertake KYC activities before on-boarding customers. Additionally, Oman participates in Common Reporting Standards initiated by the Organization of Economic Co-corporation and Development to share data with other participating countries and to combat financial crimes.
The steps taken by Oman to combat financial crimes and money laundering activities are not only crucial for Oman's economy but also to protect the investments made by investorsas unchecked money laundering activities can distort economic development, inflating asset values and creating financial bubbles.
Conclusion
The rules and regulations pertaining to banking sectors in Oman have an overall positive impact for the investors especially after the promulgation of the New Banking Law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
