Banking sector remains resilient amid economic slowdown: CBO chief

Muscat - 

Despite the economic slowdown witnessed since 2015 due to weak oil prices, Oman’s banking sector has displayed resilience, reflecting the sound policies and judicious practices followed by banks, the executive president of the Central Bank of Oman (CBO) said on Sunday.

In a keynote address at the Banking and Finance Conference and Expo at Sundus Rotana hotel on Sunday, H E Tahir bin Salim al Amri said, “The banks in Oman have remained well capitalised as reflected by the Basel capital adequacy ratio at 16.8 per cent. At the same time, the quality of banks’ assets did not witness any significant deterioration, and the delinquency rate went up just marginally from 1.9 per cent in 2015 to 2.1 per cent during 2016.”

He said the economic slowdown impinged on the banking sector business with deceleration in both growth of deposits and credit.

Growth in banks’ credit decreased from 11.2 per cent in 2015 to 10.1 per cent in 2016 and further fell to 5.7 per cent during January–September period of 2017. Banks’ deposits growth declined from eight per cent in 2015 to 5.2 per cent in 2016 but marginally improved to 5.8 per cent during January–September period of 2017.

H E Amri said that the authorities are striving to accelerate the economic diversification and the banking sector should continue to remain an active partner in this process by providing requisite credit to the identified sectors without compromising on the due diligence aspect. “The CBO will strive to ensure that there is enough liquidity in the banking system so that banks are not constrained on this front for lending to various segments.”

H E Amri also said the central bank is aware of the fact that Oman’s interest rate cycle is aligned to its currency peg with the US dollar, and accordingly, the recent hardening of interest rates is largely attributed to the normalisation of US monetary policy.

He said the CBO has implemented some important policy measures recently to ease the challenges faced by borrowers and safeguard the banking sector.

He noted that the specific provisions on restructured loans have been allowed to be implemented in a phased manner with five per cent for the first year 2016, ten per cent by 2017 and 15 per cent by the end of 2018. “We have now embarked on a quick study with the goal of re-evaluating such measures to enable the banking sector to be agile and make rational decisions in this regard. The liquidity coverage ratio, along with associated disclosure requirements, has been implemented in banks to promote the short-term resilience of liquidity risk profile.”

Under the patronage of H E Amri, the two-day Banking and Finance Conference and Expo is organised by Trifoil Expo and Tafani Events & Research.

Adhering to the Basel committee’s timeline, H E Amri said, the net stable funding ratio (NSFR) will become effective from January 2018 with a minimum ratio of 100 per cent to promote funding stability in the banking sector.

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