The new banking law (promulgated by Royal Decree 2/2025) (the New Banking Law) came into effect on 1 January 2025, repealing the previous banking law (promulgated by Royal Decree 114/2000) (the Old Banking Law).
The New Banking Law, in many ways, marks a continuation of the principles set out in the Old Banking Law, with a few key changes which include among other things:
- taking steps to align the Banking Law with international practices around consumer protection;
- reflecting the increasing size of the Omani economy and banking sector, with increases to the capital adequacy requirements and certain penalties;
- reflecting the increasing diversity of the Omani economy and banking sector, with the New Banking Law now covering digital banks and other financial institutions as well as conventional and Islamic banks; and
- extending and increasing the scope and extent of the CBO's regulatory and supervisory roles.
Consumer Protection
The New Banking Law deals far more extensively with consumer protection than the Old Banking Law.
The protections in the Old Banking Law were limited largely to the confidentiality of banking transactions in very specific circumstances (Article 70 of the Old Banking Law).
The New Banking Law provides for far more extensive protections when it comes to the use of client information (Article 98 of the New Banking Law). It also requires licenced banks not unreasonably to prevent a person or client from becoming a client of another bank or financial institution. It requires them to ensure that clients are provided with sufficient information regarding banking products and services, that their terms and conditions are sufficiently clear and understandable to all segments of clients, price lists are published for products and services, clients are treated without discrimination and they do not offer, promote or advertise any services or products in a misleading or incorrect manner (Articles 99 – 102 of the New Banking Law).
Scope of the New Banking Law
The scope of the New Banking Law, and the scope of the regulation, licensing, control, and supervision of the Central Bank of Oman (the CBO) has increased to include digital banks (Article 9 of the New Banking Law) and investment banks (Article 10 of the New Banking Law).
A similar change can be seen in relation to the regulation of financial institutions. The Old Banking Law stated that financial institutions could carry out activities falling within the definition of banking business, except for receiving deposits, provided that they were regulated pursuant to other Laws of the Sultanate by a recognised regulator (Article 52 of the Old Banking Law). The New Banking Law expressly states that the CBO has the exclusive authority to supervise and control financial institutions conducting financial activities as defined in Article 136 of the New Banking Law and being regulated by Part Six of the New Banking Law.
Applications and Approvals
The process of applying to become a licenced bank remains largely unchanged in the New Banking Law, other than the requirement for a local bank to take the form of a public joint stock company (Article 53 of both the Old Banking Law and the New Banking Law). This could be considered to be a barrier to entry.
The CBO has to issue a decision regarding any application for a banking licence has been reduced from 120 days from date on which the CBO notifies the applicant that its application is complete to 90 days from the same date (Article 55 of the New Banking Law). A failure by the CBO to issue its decision within the specified time is now deemed to be an acceptance by the CBO rather than a deemed rejection.
In relation to a branch, the CBO had 90 days to issue a decision regarding any application made to it. The bank then had 180 days from the date it receives CBO approval to commence the applicable branch's operations (Article 56 of the Old Banking Law). These provisions have been removed, with those applying to licensed banks in this regard also applying to branches under the New Banking Law.
Specific provisions have also been included in relation to overseas banks looking to set up a representative office in the Sultanate of Oman, rather than a licensed bank or a branch, with specific limitations and requirements that are to apply (Article 63 of the New Banking Law).
CBO approval is also now required to carry out activities related to securities (e.g. corporate and project financing, investment brokerage works, investment advisory services, investment management, underwriting of share issuance, and trust, fiduciary, and brokerage services), before obtaining the required licence from the competent authority (Article 60 of the New Banking Law).
Capital Adequacy
Although the principles of capital adequacy remain largely unchanged, the thresholds have increased in relation to both the CBO and licensed banks. The minimum reserve required for the CBO has increased from OMR 250,000,000 (Article 33 of the Old Banking Law) to OMR 1,000,000,000 (Article 33 of the Old Banking Law) with the amount that the CBO is required to pay into a general reserve fund/account having increased from 25% of the value of currency in circulation (Article 34 of the Old Banking Law) to 35% of the value of currency in circulation (Article 34 of the New Banking Law).
The minimum reserves required have increased for domestic licenced banks from OMR 20,000,000 to OMR 100,000,000 (Article 75 of the New Banking Law) and for foreign licenced banks from OMR 3,000,000 to the broader requirements in accordance with the policies determined by the board of the CBO (Article 75 of the New Banking Law).
Islamic Banking
The provisions relating to Islamic banking largely follow those that were added to the Old Banking law under Royal Decree 69/2012. One material addition is that the New Banking Law now expressly states that the CBO may allow conventional banks to convert Islamic windows into local Islamic banks through subsidiaries (Article 130 of the New Banking Law). Additionally, the New Banking Law has introduced the establishment and acquisition of special purpose vehicles for the purposes of facilitating Sharia-compliant transactions (Article 130 of the New Banking Law), aligning with practices that are already adopted.
Early Intervention and Administration
The administration and dissolution provisions broadly follow those in the Old Banking Law, other than the powers of the board of the CBO to manage the operations of distressed licenced banks, which have been expanded (Article 219 of the New Banking Law).
The New Banking Law also gives the CBO the power to take certain preventative measures in a number of circumstances including either where a licensed bank breaches the provisions of the New Banking Law or the board of the CBO decides that the situation of the bank is unsound or insecure. These preventative measures range from imposing additional regulatory requirements on the bank in question to dissolving its board and having the CBO manage the bank, actioning a merger between the bank in question and another bank and/or closing its branches or selling part of its activities (Article 213 of the New Banking Law).
Penalties
Generally, the penalties imposed for non-compliance with the New Banking Law are more severe than those in the Old Banking Law. For example, the penalty for anyone that is not a licenced bank using the word "masrif" or "Bank" or the phrase "banking business" has been increased from OMR 100 – OMR 250 per day (Article 50 of the Old Banking Law) to OMR 1,000 – OMR 5,000 per day (Article 235 of the New Banking Law). Similarly, the penalty for carrying out banking business without a licence has increased from OMR 100 – OMR 250 per day and/or 10 days – 3 years in prison (Article 52 of the Old Banking Law) to OMR 250 – OMR 600 per day and 3 months – 3 years in prison (Article 236 of the New Banking Law). The penalties set out in Article 236 of the New Banking Law also extend to carrying out financial activity without a licence, which was not the case in the Old Banking Law. Other new penalties introduced in the New Banking Law address the failure by licensed banks and financial institutions to take corrective action or rectify regulatory violations. For example, the penalty for failing to submit or delaying required data and documents, providing false or misleading information, and obstructing inspectors appointed under the law from carrying out their duties is not less than OMR 5,000 (Article 238 of the New Banking Law).
Conclusion
The New Banking Law is welcome in that it continues the principles set out in the Old Banking Law but enhances consumer protecting and broadens the CBO's regulatory and supervisory powers reflecting the growth in the Omani economy and the banking sector more generally.
As a firm well-versed with the Omani financial markets and regulatory framework, our local and international experts are well placed to advise on navigating the implications of this development. Please get in touch with our Oman team for further information.
