Oman CB eases capital, lending curbs

Bid to spur economic growth

DUBAI, April 3, (RTRS): Oman’s central bank announced on Tuesday its biggest package of regulatory reforms for commercial banks in years, relaxing capital and credit exposure rules in an effort to boost economic growth.

In the stock market, which hit a nine-year low this week, shares of the largest banks rose in response, with National Bank of Oman adding 3.8 percent.

Oman’s economy and markets have been pressured by low oil prices and rising US interest rates, so authorities are keen to keep banks liquid and to encourage them to lend.

Oman was the only one of the Gulf’s six wealthy oil exporters where banks’ operating profits shrank last year, Boston Consulting Group found; annual growth in conventional banks’ lending fell to 3 percent late last year, the slowest in 12 years.

The package seeks to change this by giving banks more flexibility to lend to companies and each other and to borrow from abroad, and by stimulating activity in an undeveloped interbank money market.

The minimum capital adequacy ratio, the proportion of capital that banks must hold back from lending, was reduced to 11 percent from 12 percent. That should increase additional credit available to 7.8 billion rials ($20.3 billion) from 5.2 billion rials, the central bank said.

This may do little to boost lending immediately; Oman’s Ubhar Capital noted actual adequacy ratios of all eight listed commercial banks were already several percentage points above the floor.

But it said that including other regulatory demands on banks’ capital, the move would ease future pressure on banks at the lower end of the spectrum to raise additional capital.

Other steps aimed to encourage banks to exchange their excess funds with each other, and therefore use available liquidity in the economy more efficiently, rather than sitting on the money.