Banking Sector in Oman Is Stable

The Omani banking sector has been witnessing an excellent uptrend thanks to the prevailing conducive macro-economic environment in the country. High oil prices resulted in economic buoyancy and liquidity. Economic diversification initiatives, rising government and private sector spending on infrastructure developments and healthy population growth are the major factors which contributed to this affluence.

Financial deregulation and improvement in technology accompanied by the strict regulatory and supervisory norms of the Central Bank of gOman have had a profound impact on the financial landscape of the banking sector. The CBO undertakes liquidity management operations to smooth out short-term fluctuations in bank liquidity with a focus on ensuring stability in the money market. The quarterly results reporting mechani sm for banks under the International Financial Reporting Standards provide investors and rating agencies with detailed and timely quarterly disclosures, compared with other institutions elsewhere.

The commercial banks in the Sultanate earned sizeable profits in the first half of the current year reflecting resilience of the banking system. Banks in Oman remained largely insulated from adverse international developments associated with the global financial crisis as there was no direct exposure to the toxic assets such as complex derivative products.
According to Moody’s Investor Service, Oman’s banking sector is expected to remain stable throughout the year. The credit rating agency says in its latest report that it expects the country’s domestic liquidity to remain adequate while access to foreign currency funding at lower costs to remain “in line with the improved conditions in the international capital markets.”

“For 2010, a systematic credit expansion is expected to gradually increase to between 10% and 15% although it will likely remain below the pre-crisis level of 40%,” Moodys says. “The resumption in loan growth will be driven by increased government spending and focus on the non-oil sector of the economy as part of the government’s measures to diversify the economy,” adds the report. - Oman Observer