DUBAI: Oman's banks have enough capital to withstand the impact of severe shocks to the country's economy, the central bank said, after conducting stress tests on the banking system.
"Thanks to the comfortable capital levels in the banking sector in Oman, even after the application of severe shocks, the system as a whole appeared quite resilient," the central bank said on Tuesday in its financial stability report.
Oman, which pegs its rial to the US dollar, has a conservative approach to financial regulation and many banks operating in the country are mainly focused on the sultanate or the Gulf region, which limits exposure to external shocks.
The country is also grappling with rising pressure on its public finances after it ramped up spending by more than 27 percent from 2011 to 2013, mainly on welfare and thousands of new state jobs. Its finance minister said this month that the government was looking closely at cutting costly subsidies, with petrol an obvious target.
"When assessed with respect to the international benchmarks, most of the banks were found to be in a comfortable position to face the liquidity shocks under the assumed scenarios," the central bank's report said.
Banks in the small non-OPEC oil exporter would be able to sustain an average 19 days with cash and 21 days with cash and securities as of the end of December.
"Once the liquidity crisis sets in, the banking sector would need liquidity supply to the tune of 2.3 billion rials to sustain for one month," it said.
In absolute terms, a credit shock could deplete banks capital by 447.3 million rials, or about 14.2 percent of the pre-shock regulatory capital, the stress tests found.
The central bank also urged banks to diversify their funding base as government and public sector enterprises contribute roughly one third of total deposits.
"Such a trend posed a covert though critical risk should these groups decide to make significant withdrawals from the banking sector or shift deposits to (the central bank)" it said.
The bank also said that forecasts of rising fiscal deficits after 2015 highlighted the need for measures to contain non-developmental current expenditures and increase non-oil revenues from 2013 onwards. The bank said it saw scope to refine its macro-prudential tools.
The International Monetary Fund has painted a bleak picture of Oman's public finances. It has said the sultanate was likely to slide into a deficit of 3.0 percent of gross domestic product in 2015, which would widen to 11.4 percent in 2019 as weaker oil prices eroded export receipts.
Oman banking system ‘resilient to shocks’
Oman banking system ‘resilient to shocks’
Free trade negotiations between GCC, India mark new phase of partnership, says sec-gen
RIYADH: The Gulf Cooperation Council’s secretary-general affirmed that the negotiations for a free trade agreement between the GCC and India, and the signing of the joint statement, represents a new phase of strategic partnership.
Jasem Mohamed Al-Budaiwi said that this contributes to enhancing close cooperation and strengthening economic and trade ties, according to the Saudi Press Agency.
This came during the signing ceremony of the joint statement on launching the free trade agreement negotiations between the Al-Budaiwi and India’s Minister of Commerce and Industry, Piyush Goyal, which took place in New Delhi, on Tuesday.
During the signing ceremony, Al-Budaiwi said that the Terms of Reference, signed on Feb. 5, provide a comprehensive and clear framework for these negotiations. The two nations agreed to discuss enhancing cooperation in vital strategic areas, including trade in goods, customs procedures, and services.
Additionally, the framework covers Sanitary and Phytosanitary measures, intellectual property rights, cooperation on Micro, Small, and Medium Enterprises, along with other topics of mutual interest. This reflects the comprehensive nature of the agreement and its ability to keep pace with the future economy.
Al-Budaiwi expressed hope that these negotiations would lead to a comprehensive and ambitious free trade agreement that works to remove customs and non-customs barriers, enhance the flow of quality investments in both directions, and achieve further liberalization in trade and investment cooperation between the GCC and India for mutual benefit.
This would provide a stimulating economic environment and an investment climate that opens broad horizons for the business sector, supports supply chains, and accelerates the pace of economic growth in line with the ambitious developmental visions of the GCC states.
The top official affirmed the full readiness of the General Secretariat to host the first round of negotiations at its headquarters in Riyadh during the second half of this year.
The two sides held a meeting during which they reviewed the existing cooperation relations between the GCC and India and discussed ways to develop and elevate them to broader horizons, serving mutual interests and enhancing opportunities for strategic partnership between the two sides, particularly in the economic, investment, and trade fields.
They praised the role undertaken by the negotiating teams from both sides, appreciating the efforts contributing to reaching a comprehensive agreement that enhances economic integration and supports the smooth flow of trade between the two nations.
