Oman’s New Banking Law: Key Regulatory Changes, Compliance Requirements, and Business Impact

Oman’s New Banking Law enhances the Central Bank’s authority, increases capital requirements, and strengthens financial regulations across banking sectors. It introduces stricter compliance measures, expanded digital and Islamic banking provisions, and stronger consumer protection

By Sudhanshu Singh

On January 1, 2025, Oman enacted the New Banking Law (Royal Decree 2 of 2025), replacing the Old Banking Law (Royal Decree 114 of 2000). This sweeping regulatory overhaul enhances governance, supervision, and financial stability in Oman’s banking sector. It also strengthens the role of the Central Bank of Oman (CBO) by granting it expanded regulatory powers.

The New Banking Law introduces key provisions that impact traditional banks, digital banks, Islamic banks, and financial institutions. These changes include new capital requirements, licensing regulations, consumer protection measures, and penalties for non-compliance. Financial institutions in Oman must proactively align their compliance strategies with these new legal requirements to ensure seamless operations.

Oman’s New Banking Law: Expanded role of the Central Bank

The CBO’s authority has been greatly expanded under the New Banking Law. The central bank can now regulate digital banks and investment banks, establish and own companies in Oman, and exempt itself and its subsidiaries from all taxes on capital, profits, property, reserves, and currency issuance. In addition to this, the CBO oversees the licensing and supervision of financial institutions and introduces new monetary policies to ensure financial stability.

This enhanced regulatory framework aims to strengthen governance, reduce systemic risk, and improve financial market transparency.

Banking licenses and operational requirements

Licensing conditions and timelines

• All banks operating in Oman must apply for a new license or renew their existing license under the New Banking Law.
• The public joint-stock company (PJSC) requirement: Any bank applying for a license must be structured as a public joint-stock company before submitting an application.
• The CBO must decide on a banking license application within 90 days (previously 120 days). If the CBO does not respond within this period, the application is deemed accepted.

Foreign bank representative offices

Foreign banks not licensed in Oman may now open representative offices under strict conditions:

• The foreign bank must not already have a branch in Oman;
• Activities are limited to market research and investment opportunity analysis;
• The office cannot engage in banking or financial activities; and
• It must operate under the supervision of the CBO.

These regulations allow international banks to explore the Omani market while ensuring that financial activities remain regulated.

Capital and reserve requirements

Increased capital requirements

• Minimum capital requirement for the CBO increased from OMR 250 million (US$649 million) to OMR 1 billion (US$2.59 billion).
• Minimum capital requirement for domestic banks increased from OMR 20 million (US$51 million) to OMR 100 million (US$259 million).
• Foreign bank capital requirements will be determined by CBO policies rather than a fixed amount.

Mandatory reserves

The CBO now has the power to impose mandatory cash reserves on banks to protect depositors and enhance financial stability. This provision allows the CBO to enforce additional financial buffers in response to economic conditions.

Regulation of securities and financial institutions

Approval for securities-related activities

Banks wishing to engage in securities trading, investment brokerage, investment management, or underwriting stock issues must now obtain prior approval from the CBO before applying for a license from the Financial Services Authority. They must comply with strict financial transparency requirements and ensure that all securities-related transactions adhere to international regulatory standards.

Financial institutions under the New Banking Law

Previously, financial institutions in Oman were regulated primarily through CBO-issued circulars. The New Banking Law now clearly defines financial institutions and their activities, which include:

• Financial leasing and money services;
• Foreign exchange transactions;
• Electronic banking and fintech services;
• Crowdfunding based on loan structures; and
• Other financial activities as determined by the CBO.

Financial institutions are now subject to the same reporting, governance, and confidentiality obligations as banks, ensuring better oversight.

Digital banking and Islamic banking provisions

Introduction of digital banks

The New Banking Law formally recognizes digital banks, defined as banks that operate exclusively through digital platforms. The CBO is responsible for issuing regulations that will govern licensing and capital requirements for digital banks, cybersecurity and data protection measures, and consumer protection frameworks to ensure fair banking practices.

Strengthened Islamic banking framework

The law retains many existing Islamic banking provisions while introducing notable changes. Islamic banks can now establish and own special purpose vehicles (SPVs) to facilitate Sharia-compliant transactions. Conventional banks can convert Islamic banking windows into fully-fledged Islamic banks through subsidiaries. CBO oversight on Islamic financial instruments, including sukuk issuance and profit-sharing agreements, has been expanded to ensure compliance with both regulatory and Sharia requirements.

Consumer protection and confidentiality

Enhanced client protection measures

The New Banking Law introduces stronger consumer protection policies, requiring banks to:

• Provide clear, transparent, and accurate information about banking products;
• Publish pricing lists for products and services;
• Treat clients fairly and without discrimination; and
• Refrain from misleading advertising or unfair marketing practices.

Confidentiality and data protection

• Banks and financial institutions cannot disclose client information without explicit consent;
• Exceptions apply only if required by the CBO, court rulings, or legal obligations; and
• Unauthorized disclosure may result in fines and imprisonment.

These measures align Oman’s banking sector with global standards on data privacy and client protection.

Banking reorganization and governance

Change in control and governance requirements

Banks must notify the CBO if a shareholder acquires five percent or more of voting shares or if a change in ownership impacts the financial stability of the institution. Key personnel changes, including board members, executive officers, and general managers, require CBO approval before appointments become valid. This enhanced oversight strengthens regulatory control over corporate governance, shareholder influence, and executive leadership in the banking sector.

Enforcement measures, penalties, and liquidation

Stricter enforcement and penalties

The New Banking Law introduces heavier penalties for violations, including:

• Fines of up to OMR 200,000 (US$519,478) for banks and OMR 50,000 (US$129,869) for financial institutions;
• Daily fines of OMR 1,000 (US$2,597) to OMR 5,000 (US$12,986) for unauthorized use of banking-related terms; and
• Imprisonment of up to three years for engaging in banking activities without a valid license.

Bank liquidation and dissolution

While voluntary liquidation and CBO-enforced dissolution provisions remain largely unchanged from the Old Banking Law, the CBO can now intervene earlier if a bank is deemed financially unstable. New measures include the ability to merge troubled banks with stronger institutions, ensuring financial stability and protecting depositors’ interests.

Outlook after Oman’s New Banking Law

Oman’s New Banking Law represents a landmark regulatory reform that strengthens the CBO’s authority, increases capital requirements, and introduces new governance standards. It also expands the regulation of digital and Islamic banking, enhances consumer protection, and introduces stricter penalties for non-compliance.

For banks, financial institutions, and foreign investors, the New Banking Law presents both compliance challenges and business opportunities. As Oman continues to modernize its banking sector, businesses must adapt to regulatory changes, enhance compliance frameworks, and leverage new financial opportunities in the evolving landscape.

(OMR 1 = US$2.59)

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