20 June 2013
Muscat: The balance of payments (BoP) situation in the Sultanate continues to remain comfortable, thanks to a robust growth in oil production and prices remaining at high levels.
As hydrocarbon exports comprise more than two-third of total exports, the balance of payments outlook to a large extent hinges on developments on this front, the Central Bank of Oman (CBO) said in its annual report yesterday.
Merchandise trade continued to dominate Oman's balance of payments in 2012, though the growth in merchandise exports slowed down to 10.7 per cent in 2012 from 28.7 per cent in the previous year. Merchandise trade surplus stood higher at OMR10.2 billion compared to OMR9.8 billion in the previous year.
The current account witnessed a surplus of OMR3.1 million in 2012 lower than OMR3.4 billion in the previous year. In terms of per cent to gross domestic product, the current account surplus stood at 10.4 per cent in 2012 as compared to 12.8 per cent in the previous year.
The Omani economy was again a net lender in 2012 with the capital and financial account posting a net outflow of OMR2.4 billion for the year. The overall balance (current, capital and financial accounts combined) registered a modest surplus in 2012 leading to an increase in the foreign exchange reserves by OMR397 million.
Bank assets
The CBO report also said that the balance sheet of commercial banks strengthened further due to robust growth in deposits and credit. "There was significant improvement in the asset quality and profitability of banks during the year with total assets of commercial banks increasing by 13.3 per cent to OMR20.9 billion in 2012," the report noted.
Aggregate deposits of commercial banks increased by 12.7 per cent on year-on-year basis to OMR14.2 billion at the end of December 2012. Bank credit also expanded sharply.
The gross non-performing loans as percentage of total credit at the end of 2012 stood lower at 2.2 per cent compared to 2.5 per cent a year ago. Basel II regulatory capital at the end of 2012 stood at 16 per cent, which was significantly higher than the minimum regulatory requirement of 12 per cent prescribed by the CBO.
Profits of commercial banks, after provisions and taxes, increased by 15.6 per cent from OMR264.0 million in 2011 to OMR305.3 million in 2012.
The CBO initiated a number of regulatory and supervisory measures recently to promote financial stability in general and improve efficiency of banking system in particular.
The minimum regulatory capital was recently raised from 10 per cent to 12 per cent of the risk-weighted assets. The final guidelines on pillar 2 under Basel II were issued to the banks.
The CBO has issued the final roadmap for implementation of Basel III framework. The Internal Capital Adequacy Assessment Process (ICAAP) has been operationalised by all banks in the Sultanate with effect from December 31, 2012.
Risk-based supervision, which was initiated on a pilot basis in the previous year, has been implemented in full to cover the entire banking system from the year 2012. With regard to personal loans, new micro prudential norms have been introduced by capping the debt repayment capacity in relation to net salary receipts. Some flexibility for banks with regard to the quantitative ceiling on personal loans was also introduced recently.
Recently, several measures have been taken by the CBO and the government to develop the required infrastructure and devise necessary policies for the small and medium enterprises (SMEs) sector. The advent of Islamic banking is expected to complement the current conventional banking in promoting growth in the economy.
It is also expected to further diversify banking services and expand financial inclusion. The future of Oman's financial sector remains promising taking into account the pace of economic diversification and the growing role of private sector in the development process.
Two new local banks have been granted approval to operate as Islamic banks, one has already started its operations in December 2012 and the second one is expected to commence business in the third quarter of 2013. Almost all local banks have evinced interest in establishing windows for practicing Islamic banking with four of them already operational.
Banks are optimistic that they will be in a position to significantly increase business and this will augur well for the economy as a whole.
Innovative asset-based financing including prospects of sukuk provide immense opportunities. This will enhance product diversification in the banking system.
Recently, several measures have been taken by the CBO and the government to develop the required infrastructure and devise necessary policies for the small and medium enterprises (SMEs) sector. The CBO has advised the banks that they should formulate a liberal lending policy for SME segment and that SME financing needs to be considered in the context of larger canvas and banks should not be guided mainly by collaterals in their credit decisions.
They should have a separate department with adequate staff and proper delegation of work to deal with SME finance. The banks should allocate 5 per cent of their total credit to SMEs. This target will be reviewed from time to time for scope for further rise. To encourage lending to SMEs, the prudential requirement for banks to lend to SMEs have also been relaxed.
Key Points:
Merchandise trade surplus stood higher at OMR10.2b compared to OMR9.8b in previous year
Current account witnessed a surplus of OMR3.1m in 2012, lower than OMR3.4b in 2011
Capital and financial account posted a net outflow of OMR2.4b
Profits of commercial banks increased by 15.6% from OMR264m in 2011 to OMR305.3m in 2012
CBO has issued the final roadmap for Basel III implementation
Profits of commercial banks, after provisions and taxes, increased by 15.6 per cent from OMR264.0 million in 2011 to OMR305.3 million in 2012. The CBO initiated a number of regulatory and supervisory measures recently to promote financial stability in general and improve efficiency of banking system in particular.
The minimum regulatory capital was recently raised from 10 per cent to 12 per cent of the risk-weighted assets. The final guidelines on pillar 2 under Basel II were issued to the banks.
The CBO has issued the final roadmap for implementation of Basel III framework.
The Internal Capital Adequacy Assessment Process (ICAAP) has been operationalised by all banks in the Sultanate with effect from December 31, 2012.
Risk-based supervision, which was initiated on a pilot basis in the previous year, has been implemented in full to cover the entire banking system from the year 2012. With regard to personal loans, new micro prudential norms have been introduced by capping the debt repayment capacity in relation to net salary receipts. Some flexibility for banks with regard to the quantitative ceiling on personal loans was also introduced recently.
Recently, several measures have been taken by the CBO and the government to develop the required infrastructure and devise necessary policies for the small and medium enterprises (SMEs) sector. The advent of Islamic banking is expected to complement the current conventional banking in promoting growth in the economy. It is also expected to further diversify banking services and expand financial inclusion. The future of Oman's financial sector remains promising taking into account the pace of economic diversification and the growing role of private sector in the development process.
Two new local banks have been granted approval to operate as Islamic banks, one has already started its operations in December 2012 and the second one is expected to commence business in the third quarter of 2013.
Almost all local banks have evinced interest in establishing windows for practicing Islamic banking with four of them already operational. Banks are optimistic that they will be in a position to significantly increase business and this will augur well for the economy as a whole.
SME segment
Innovative asset-based financing including prospects of sukuk provide immense opportunities. This will enhance product diversification in the banking system.
Recently, several measures have been taken by the CBO and the government to develop the required infrastructure and devise necessary policies for the small and medium enterprises (SMEs) sector.
The CBO has advised the banks that they should formulate a liberal lending policy for SME segment and that SME financing needs to be considered in the context of larger canvas and banks should not be guided mainly by collaterals in their credit decisions.
They should have a separate department with adequate staff and proper delegation of work to deal with SME finance.
The banks should allocate 5 per cent of their total credit to SMEs. This target will be reviewed from time to time for scope for further rise. To encourage lending to SMEs, the prudential requirement for banks to lend to SMEs have also been relaxed.
Muscat: The balance of payments (BoP) situation in the Sultanate continues to remain comfortable, thanks to a robust growth in oil production and prices remaining at high levels.
As hydrocarbon exports comprise more than two-third of total exports, the balance of payments outlook to a large extent hinges on developments on this front, the Central Bank of Oman (CBO) said in its annual report yesterday.
Merchandise trade continued to dominate Oman's balance of payments in 2012, though the growth in merchandise exports slowed down to 10.7 per cent in 2012 from 28.7 per cent in the previous year. Merchandise trade surplus stood higher at OMR10.2 billion compared to OMR9.8 billion in the previous year.
The current account witnessed a surplus of OMR3.1 million in 2012 lower than OMR3.4 billion in the previous year. In terms of per cent to gross domestic product, the current account surplus stood at 10.4 per cent in 2012 as compared to 12.8 per cent in the previous year.
The Omani economy was again a net lender in 2012 with the capital and financial account posting a net outflow of OMR2.4 billion for the year. The overall balance (current, capital and financial accounts combined) registered a modest surplus in 2012 leading to an increase in the foreign exchange reserves by OMR397 million.
Bank assets
The CBO report also said that the balance sheet of commercial banks strengthened further due to robust growth in deposits and credit. "There was significant improvement in the asset quality and profitability of banks during the year with total assets of commercial banks increasing by 13.3 per cent to OMR20.9 billion in 2012," the report noted.
Aggregate deposits of commercial banks increased by 12.7 per cent on year-on-year basis to OMR14.2 billion at the end of December 2012. Bank credit also expanded sharply.
The gross non-performing loans as percentage of total credit at the end of 2012 stood lower at 2.2 per cent compared to 2.5 per cent a year ago. Basel II regulatory capital at the end of 2012 stood at 16 per cent, which was significantly higher than the minimum regulatory requirement of 12 per cent prescribed by the CBO.
Profits of commercial banks, after provisions and taxes, increased by 15.6 per cent from OMR264.0 million in 2011 to OMR305.3 million in 2012.
The CBO initiated a number of regulatory and supervisory measures recently to promote financial stability in general and improve efficiency of banking system in particular.
The minimum regulatory capital was recently raised from 10 per cent to 12 per cent of the risk-weighted assets. The final guidelines on pillar 2 under Basel II were issued to the banks.
The CBO has issued the final roadmap for implementation of Basel III framework. The Internal Capital Adequacy Assessment Process (ICAAP) has been operationalised by all banks in the Sultanate with effect from December 31, 2012.
Risk-based supervision, which was initiated on a pilot basis in the previous year, has been implemented in full to cover the entire banking system from the year 2012. With regard to personal loans, new micro prudential norms have been introduced by capping the debt repayment capacity in relation to net salary receipts. Some flexibility for banks with regard to the quantitative ceiling on personal loans was also introduced recently.
Recently, several measures have been taken by the CBO and the government to develop the required infrastructure and devise necessary policies for the small and medium enterprises (SMEs) sector. The advent of Islamic banking is expected to complement the current conventional banking in promoting growth in the economy.
It is also expected to further diversify banking services and expand financial inclusion. The future of Oman's financial sector remains promising taking into account the pace of economic diversification and the growing role of private sector in the development process.
Two new local banks have been granted approval to operate as Islamic banks, one has already started its operations in December 2012 and the second one is expected to commence business in the third quarter of 2013. Almost all local banks have evinced interest in establishing windows for practicing Islamic banking with four of them already operational.
Banks are optimistic that they will be in a position to significantly increase business and this will augur well for the economy as a whole.
Innovative asset-based financing including prospects of sukuk provide immense opportunities. This will enhance product diversification in the banking system.
Recently, several measures have been taken by the CBO and the government to develop the required infrastructure and devise necessary policies for the small and medium enterprises (SMEs) sector. The CBO has advised the banks that they should formulate a liberal lending policy for SME segment and that SME financing needs to be considered in the context of larger canvas and banks should not be guided mainly by collaterals in their credit decisions.
They should have a separate department with adequate staff and proper delegation of work to deal with SME finance. The banks should allocate 5 per cent of their total credit to SMEs. This target will be reviewed from time to time for scope for further rise. To encourage lending to SMEs, the prudential requirement for banks to lend to SMEs have also been relaxed.
Key Points:
Merchandise trade surplus stood higher at OMR10.2b compared to OMR9.8b in previous year
Current account witnessed a surplus of OMR3.1m in 2012, lower than OMR3.4b in 2011
Capital and financial account posted a net outflow of OMR2.4b
Profits of commercial banks increased by 15.6% from OMR264m in 2011 to OMR305.3m in 2012
CBO has issued the final roadmap for Basel III implementation
Profits of commercial banks, after provisions and taxes, increased by 15.6 per cent from OMR264.0 million in 2011 to OMR305.3 million in 2012. The CBO initiated a number of regulatory and supervisory measures recently to promote financial stability in general and improve efficiency of banking system in particular.
The minimum regulatory capital was recently raised from 10 per cent to 12 per cent of the risk-weighted assets. The final guidelines on pillar 2 under Basel II were issued to the banks.
The CBO has issued the final roadmap for implementation of Basel III framework.
The Internal Capital Adequacy Assessment Process (ICAAP) has been operationalised by all banks in the Sultanate with effect from December 31, 2012.
Risk-based supervision, which was initiated on a pilot basis in the previous year, has been implemented in full to cover the entire banking system from the year 2012. With regard to personal loans, new micro prudential norms have been introduced by capping the debt repayment capacity in relation to net salary receipts. Some flexibility for banks with regard to the quantitative ceiling on personal loans was also introduced recently.
Recently, several measures have been taken by the CBO and the government to develop the required infrastructure and devise necessary policies for the small and medium enterprises (SMEs) sector. The advent of Islamic banking is expected to complement the current conventional banking in promoting growth in the economy. It is also expected to further diversify banking services and expand financial inclusion. The future of Oman's financial sector remains promising taking into account the pace of economic diversification and the growing role of private sector in the development process.
Two new local banks have been granted approval to operate as Islamic banks, one has already started its operations in December 2012 and the second one is expected to commence business in the third quarter of 2013.
Almost all local banks have evinced interest in establishing windows for practicing Islamic banking with four of them already operational. Banks are optimistic that they will be in a position to significantly increase business and this will augur well for the economy as a whole.
SME segment
Innovative asset-based financing including prospects of sukuk provide immense opportunities. This will enhance product diversification in the banking system.
Recently, several measures have been taken by the CBO and the government to develop the required infrastructure and devise necessary policies for the small and medium enterprises (SMEs) sector.
The CBO has advised the banks that they should formulate a liberal lending policy for SME segment and that SME financing needs to be considered in the context of larger canvas and banks should not be guided mainly by collaterals in their credit decisions.
They should have a separate department with adequate staff and proper delegation of work to deal with SME finance.
The banks should allocate 5 per cent of their total credit to SMEs. This target will be reviewed from time to time for scope for further rise. To encourage lending to SMEs, the prudential requirement for banks to lend to SMEs have also been relaxed.
Times of Oman 2013
