Moody's Investors Service has changed the outlook on seven Omani banks to stable from negative.

The ratings agency said it has affirmed their long-term local and foreign currency deposit ratings. The banks under review are Bank Muscat, HSBC Bank Oman, Bank Dhofar, National Bank of Oman, Sohar International Bank, Oman Arab Bank and Bank Nizwa.

The revisions are based on Moody's expectation that the operating environment for the banks will continue to improve. It has also changed the outlook on Ba3 Omani government's ratings to stable from negative. The higher oil prices have led to a large reduction in external vulnerability and government liquidity pressures and Moody's expects that oil prices will average above $60/barrel during the next several years, increasing the likelihood that these pressures will remain contained.

In addition, the "ongoing implementation of the government's medium-term fiscal adjustment program will also underpin a steady decline in the direct government debt burden to the pre-pandemic level," it said.

Moody's expects the government would step in to provide support to banks in case of need due to the importance of the country's banks in the domestic financial system and the significant government shareholdings and deposits in several banks.

Also, the conservative regulatory framework in Oman helps support the banks' governance practices, it added.

(Writing by Brinda Darasha; editing by Daniel Luiz)

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