April 15, 2019

The Central Bank of Oman (CBO) issued the bank resolution framework, which provides the recovery and resolution regime for the banking sector. The purpose of the framework is to prepare banks for self-propelled recovery and, if circumstances necessitate, allow authorities to resolve banks in an orderly manner with least disruption and minimal cost to the national exchequer while preserving financial stability. The framework will be applicable to all banks designated as domestic systemically important banks (D-SIBs) by CBO. At its discretion, CBO may apply all or parts of the framework to any other bank it licenses.

The bank resolution framework puts in place effective procedures to ensure that in the extreme event of any problems occurring at banks, the damage to the entire financial system of the country is kept at the minimum. The framework also offers incentives to banks to adopt strategies that enable the authorities to manage banking crisis with minimal use of public funds while preserving financial stability. With proper incentive structure and effective procedures in place, the public perception on the robustness of the health of the banking sector would improve and that would eventually boost the financial stability in Oman. CBO will separately issue instructions on recovery and resolution planning to the banks that are required to prepare and submit such plans.

With the issuance of bank resolution framework, CBO has become one of the first central banks in the region to formalize its bank recovery and resolution regime, which reflects its commitment to continue to enhance its regulatory and supervisory framework in line with the international best practices and evolving industry dynamics. The release of the resolution framework in Oman is in line with the FSB-published "Key Attributes of Effective Resolution Regimes for Financial Institutions."

 

Keywords: Middle East and Africa, Oman, Banking, Resolution Framework, Financial Stability, D-SIBs, FSB, CBO

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