MUSCAT: Oman banks are in a comfortable position in maintaining capital adequacy ratio — an international standard that measures a bank’s risk of insolvency from excessive losses.
The core capital and reserves of commercial banks increased by 7.8 per cent to OMR3.24 billion in 2014, while banks’ supplementary capital elements went up by 2.9 per cent to OMR651.4 million, said the Central Bank of Oman in its annual report.
The BIS (Bank for International Settlement) capital adequacy ratio of commercial banks averaged 15.4 per cent by the end of 2014, which exceeded the 12.625 per cent (including 0.625 per cent capital conservation buffer) mandated for individual banks. “Total provisions and reserved interest held by commercial banks continued to surpass the stock of non-performing loans,” the annual report noted.
The gross non-performing loans increased by 9.1 per cent from OMR458 million in 2013 to OMR500 million in 2014. However, the gross non-performing loan ratio as a proportion to total loans and advances net of reserve interest, remained unchanged at 2.1 per cent by the end of 2014, over the previous year.
Central bank said that the increase in customer deposits with banks in 2014 to the tune of OMR1.69 billion, augmentation of the capital base by OMR0.3 billion and borrowings from banks abroad of OMR0.2 billion provided the additional resources for further asset creation.
The increased funds were mainly deployed in the expansion of credit by OMR1.72 billion as well as in investments.
In fact, the Central Bank of Oman issued the final framework on Liquidity Coverage Ratio (LCR) and LCR disclosure standard requirements under Basel III in December 2014, after due process of consultations.
The Basel Committee on Banking Supervision developed the LCR to promote the short-term resilience of the liquidity risk profile of banks by ensuring that they have sufficient high quality liquid assets to survive a significant stress scenario lasting 30 calendar days. The standard for LCR was effective from January1, 2015 with a minimum ratio of 60 per cent.
Oman’s banking sector comprised 16 conventional commercial banks of which 7 were locally incorporated and 9 were branches of foreign banks, two specialised banks, two full-fledged Islamic banks together with 6 local commercial banks operating separate Islamic windows for banking operations.
