Featured Product

    CBO Releases Financial Stability Report for 2019

    November 07, 2019

    CBO released its seventh issue of the Financial Stability Report. The report highlights that the Omani banking sector remained robust with sound asset quality and strong capital buffers. Banks posted reasonable profits that allowed organic growth and strengthened capital buffers. The sector remained fairly liquid with both the liquidity coverage ratio and the net stable funding ratio above the regulatory requirements. The countercyclical measures adopted by CBO in early 2018 also helped banks stay on a strong footing, despite the rising interest rates in 2018 and the challenging operating conditions.

    The key highlights of the report include the following:

    • Deposits of government and public-sector enterprises to total deposits of the banking sector increased to about 37% in 2018, compared to 34.1% in 2017. While individual banks exhibit varying degree of resilience to deposit withdrawal by the government, on average the liquid assets (excluding inter-bank assets) of the banking sector almost cover the public sector deposits.
    • Non-performing loans (NPLs) remained at low levels indicating the soundness of the  credit portfolio of banks. Gross NPLs (or Stage 3 loans) of banks were OMR 683 million or 2.73% at the end of 2018. The net NPL ratio increased slightly from 0.66% at the end of 2017 to 0.95% in December 2018. The loans assessed as Stage 2 were over OMR 5 billion or 20% of the total lending portfolio of banks at the end of 2018. Given the volume of loans in this category, due attention is warranted to monitor and manage the rising trend and to keep them from slipping to NPLs.
    • The concentration level in Oman is in line with the peer group of Gulf Cooperation Council (GCC) countries. To deal with the risks emanating from the presence of large institutions, CBO had issued guidelines to identify, supervise, and regulate the  domestic systemically important banks (D-SIBs). Moreover, as a part of the preparedness to amicably resolve the systemically important banks, CBO has also recently published a Bank Resolution Framework.
    • Capital to Risk-Weighted Assets Ratio (CRAR) of banks was 17.9% at the end of December 2018 as compared to 17.4% a year earlier. The stress tests show that, at the end of December 2018, the CRAR of the domestic banks would drop from 17.6% to 15.6% when banks are subjected to a battery of severe stress events. The reverse stress test showed that the current aggregate NPLs of domestic banks should increase by at least 200% before the CBO’s required CRAR of 13.5% could be breached. 
    • The total real estate exposure of the banking sector continued to be about 30% of the total lending portfolio. This is considered large as a weakening in the real estate market may expose the banking sector to considerable risks. Furthermore, mortgage financing to households formed about 15% of the lending portfolio or 50% of its real estate exposure. However, at present, there is no sign of any significant stress in the Omani real estate market.

    Keywords: Middle East and Africa, Oman, Banking, Insurance, Securities, Financial Stability Report, LCR, NSFR, Concentration Risk, Stress Testing, CRAR, NPLs, CBO

    Featured Experts
    Related Articles
    News

    HKMA Announces Liquidity Measures in Response to COVID-19 Outbreak

    HKMA issued a circular on liquidity measures that HKMA has taken or plans to take in response to COVID-19 outbreak.

    April 03, 2020 WebPage Regulatory News
    News

    BaFin Lowers Countercyclical Capital Buffer Amid COVID-19 Outbreak

    BaFin published a general order to lower the countercyclical capital buffer (CCyB) from 0.25% to 0% as of April 01, 2020.

    April 03, 2020 WebPage Regulatory News
    News

    ESMA Updates Risk Assessment in Light of COVID-19

    ESMA updated its risk assessment to account for the impact of the COVID-19 pandemic.

    April 02, 2020 WebPage Regulatory News
    News

    FSB Outlines and Reprioritizes Its Work to Address COVID-19 Risks

    FSB published a statement that outlines its work toward addressing the financial stability risks posed by COVID-19, along with the reprioritization of its work program for 2020.

    April 02, 2020 WebPage Regulatory News
    News

    EIOPA Announces Measures to Address the Impact of COVID-19

    Due to the outbreak of COVID-19, EIOPA is re-prioritizing and alleviating the burden by extending the deadlines or delaying projects where input from national competent authorities and/or industry is foreseen.

    April 02, 2020 WebPage Regulatory News
    News

    EBA Guidelines on Use of Payment Moratoria to Address Liquidity Issues

    EBA published detailed guidance on the treatment of legislative and non-legislative moratoria on loan repayments to be applied before June 30, 2020, in light of the COVID-19 crisis.

    April 02, 2020 WebPage Regulatory News
    News

    PRA Outlines Approach to Reporting and Disclosures Amid COVID-19

    PRA published a statement to outline its approach to regulatory reporting and Pillar 3 disclosures for UK banks, building societies, designated investment firms, and credit unions.

    April 02, 2020 WebPage Regulatory News
    News

    PRA Finalizes Certain Modeling Issues for Solvency II Internal Models

    PRA published a statement (PS9/20) that sets out the final policy on modeling of income-producing real estate loans and internal credit assessment for illiquid, unrated assets within the Solvency II internal models.

    April 02, 2020 WebPage Regulatory News
    News

    EIOPA Issues Statement on Mitigating Impact of COVID-19 Outbreak

    EIOPA issued a statement to insurers and intermediaries, urging them to take steps to mitigate the impact of COVID-19 on consumers.

    April 01, 2020 WebPage Regulatory News
    News

    APRA on Changes to Reporting Obligations for Banks Due to COVID-19

    APRA, in collaboration with the Reserve Bank of Australia (RBA) and the Australian Bureau of Statistics (ABS), published a letter outlining temporary changes in reporting obligations for authorized deposit-taking institutions and registered financial corporations, in response to COVID-19.

    April 01, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 4936