Central Bank of Oman
Encyclopedia
The Central Bank of Oman was established in December 1974 and began operations on 1 April 1975. It replaced the Oman Currency Board as the principal currency authority in Oman.
The Central Bank of Oman is responsible for maintaining the stability of the national currency the Omani Rial
and ensuring monetary and financial stability in a deregulated and open financial system. The capital base of the CBO which was one million Omani Rials at the commencement of operations in 1975, was strengthened over time and since April 2002 has remained at R0300 million. At the end of 2005, CBO's assets/liabilities totalled RO 1826.4 million.
The Omani banking system has experienced several mergers since the 1990s and as a result the number of commercial bank
s at the end of 2005 stood at 13, of which five are locally incorporated and eight are branches of foreign banks, together having a branch network of 329 branches. Local banks, in addition, have 10 branches and one representative office abroad. As at the end of 2005, there were also three specialised banks in operation, with a network of 26 branches. The CB O has approved the establishment of an additional local bank (Sohar Bank) and a branch of a foreign bank (Bank of Beirut) that are expected to commence operations by the end of 2006. In order to strengthen the financial position of licensed banks and enable them to face competition as well as fhttp://en.wikipedia.org/skins-1.5/common/images/button_bold.pnginance large projects, the minimum capital requirement
for commercial banks was enhanced to RO50 million for local banks and RO10 million for foreign banks. The overall capital adequacy ratio
of the commercial banks improved to reach 18.5 percent in 2005.
The Sultanate has made significant progress in implementing the new capital Adequacy criteria laid down in the Basel-II Accord. The adoption of Basel II
would transform the current approaches and tools of supervision of the CBO as well as the audit and risk management
practices of banks.
The CBO also administers and participates in the financing of a Bank deposit insurance system, which provides the commercial banks with a high level of security for deposits, while cushioning the effects of any unforeseen circumstances. The CBO also has an early warning system for commercial banks that enables it to
predict possible financial crises and take preventive action when necessary.
The various monetary policy
instruments under the CBO's command could be broadly categorized into indirect measures and direct measures. Indirect policy (market oriented) measures include open market operations involving the buying and selling of securities, issuance of Central Bank's own securities, swaps etc. CD auctions are the main open market type operations conducted by CBO to absorb Omani Rial liquidity and banks can repossess these CDs to acquire liquidity both in the inter-bank market as well as the CBO. Direct monetary policy instruments used by the CBO are mainly in the form of reserve requirement
s and lending ratios .
The CBO has put in place an efficient and advanced payment and settlement system in Oman. launch of the Real Time Gross Settlement System (RTGS) was the first milestone and went into live operations on 28 September 2005.
The Central Bank of Oman is responsible for maintaining the stability of the national currency the Omani Rial
Omani rial
The rial is the currency of Oman. It is divided into 1000 baisa .-History:Before 1940, the Indian rupee and the Maria Theresa Thaler were the main currencies circulating in Muscat and Oman, as the state was then known, with rupees circulating on the coast and Thaler in the interior...
and ensuring monetary and financial stability in a deregulated and open financial system. The capital base of the CBO which was one million Omani Rials at the commencement of operations in 1975, was strengthened over time and since April 2002 has remained at R0300 million. At the end of 2005, CBO's assets/liabilities totalled RO 1826.4 million.
The Omani banking system has experienced several mergers since the 1990s and as a result the number of commercial bank
Commercial bank
After the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...
s at the end of 2005 stood at 13, of which five are locally incorporated and eight are branches of foreign banks, together having a branch network of 329 branches. Local banks, in addition, have 10 branches and one representative office abroad. As at the end of 2005, there were also three specialised banks in operation, with a network of 26 branches. The CB O has approved the establishment of an additional local bank (Sohar Bank) and a branch of a foreign bank (Bank of Beirut) that are expected to commence operations by the end of 2006. In order to strengthen the financial position of licensed banks and enable them to face competition as well as fhttp://en.wikipedia.org/skins-1.5/common/images/button_bold.pnginance large projects, the minimum capital requirement
Capital requirement
Capital requirement refers to -The standardized requirements in place for banks and other depository institutions, which determines how much capital is required to be held for a certain level of assets through regulatory agencies such as the Bank for International Settlements, Federal Deposit...
for commercial banks was enhanced to RO50 million for local banks and RO10 million for foreign banks. The overall capital adequacy ratio
Capital adequacy ratio
Capital adequacy ratio , also called Capital to Risk Assets Ratio , is a ratio of a bank's capital to its risk...
of the commercial banks improved to reach 18.5 percent in 2005.
The Sultanate has made significant progress in implementing the new capital Adequacy criteria laid down in the Basel-II Accord. The adoption of Basel II
Basel II
Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision...
would transform the current approaches and tools of supervision of the CBO as well as the audit and risk management
Risk management
Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities...
practices of banks.
The CBO also administers and participates in the financing of a Bank deposit insurance system, which provides the commercial banks with a high level of security for deposits, while cushioning the effects of any unforeseen circumstances. The CBO also has an early warning system for commercial banks that enables it to
predict possible financial crises and take preventive action when necessary.
The various monetary policy
Monetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...
instruments under the CBO's command could be broadly categorized into indirect measures and direct measures. Indirect policy (market oriented) measures include open market operations involving the buying and selling of securities, issuance of Central Bank's own securities, swaps etc. CD auctions are the main open market type operations conducted by CBO to absorb Omani Rial liquidity and banks can repossess these CDs to acquire liquidity both in the inter-bank market as well as the CBO. Direct monetary policy instruments used by the CBO are mainly in the form of reserve requirement
Reserve requirement
The reserve requirement is a central bank regulation that sets the minimum reserves each commercial bank must hold of customer deposits and notes...
s and lending ratios .
The CBO has put in place an efficient and advanced payment and settlement system in Oman. launch of the Real Time Gross Settlement System (RTGS) was the first milestone and went into live operations on 28 September 2005.