Oman raises limit for banks’ government bond holdings

Muscat / Reuters

Oman’s central bank has increased the maximum amount of government securities which banks can hold to 45 percent of their net worth from 30 percent, central bank and commercial banking sources said.
The move will make it easier for the government to sell debt as it steps up bond issues to finance a big budget deficit caused by low oil prices.
Omani conventional banks’ holdings of government bonds jumped to 830.6 million rials ($2.16 billion) in January from 563.7 million rials a year earlier.
Earlier this week, the central bank adjusted its reserves policy to encourage banks to buy government debt; banks can now count Treasury bills, government development bonds and government sukuk towards their reserve requirements, up to a maximum of 2 percent of deposits. Overall, banks must park 5 percent of their deposits at the central bank.
The Central Bank of Oman (CBO) was established in December 1974 and began operations on April 1, 1975. It replaced the Oman Currency Board as the principal currency authority in Oman.
The CBO is responsible for maintaining the stability of the national currency the Omani Rial and ensuring monetary and financial stability in a deregulated and open financial system. The capital base of the CBO which was one million Omani Rials at the commencement of operations in 1975, was strengthened over time and since April 2002 has remained at R0300 million. At the end of 2005, CBO’s assets/liabilities totalled RO 1826.4 million.
The Omani banking system has experienced several mergers since the 1990s and as a result the number of commercial banks at the end of 2005 stood at 13, of which five are locally incorporated and eight are branches of foreign banks, together having a branch network of 329 branches.
Local banks, in addition, have 10 branches and one representative office abroad. As at the end of 2005, there were also three specialised banks in operation, with a network of 26 branches.