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CBO Holds Meeting on Assessment of Vulnerabilities in Omani Macro-Financial System   (04/04/2017)

CBO's Financial Stability Department (FSD) held a meeting on Assessment of Vulnerabilities in the Omani Macro-Financial System with External Stakeholders on Monday, 3rd April 2017.

The meeting which was held at the CBO premises in Ruwi, was intended to receive the feedback of market participants on issues of potential distress brewing in the Omani economy, in addition to sharing information on developments in the area of financial stability with the participants.

During the meeting special emphasis was made on the probable economic fallout due to the current economic developments in the wake of sharp decline in oil prices and its implications on the financial system.

Accordingly, FSD officials held a series of presentations explaining the impact of low oil prices on the Omani economy in addition to providing an overview on the recent developments in the area of financial stability management in Oman.

Nominees from banks and FLCs and academia (SQU) attended the meeting in which they raised queries on issues of common interest such as interest risks, oil price fall and their implication on fiscal space and overall growth of the economy.

Initiating the discussion, Dr. Qais Al Yahyaei, Head of Financial Stability Department, welcomed the participants and noted that this meeting was being held at a critical time of twin deficit in fiscal balance and current account due to decrease in revenue on account of persistent low oil prices.

Dr. Qais also presented an overview on the financial health of the banking sector. The data as of end-December 2016 showed that there is no immediate concerns on capital adequacy, liquidity, assets quality and profitability positions of the banks. He, however noted, that concentration of loans, deposits, and borrowers continues to be an issue of concern to the banking sector. Dr. Qais also emphasized that the current prevailing macroeconomic uncertainty warrants extra vigilance and cautionary measures from banks in their exposures towards sensitive sectors such as real estate and personal loans.

During the meeting deliberations, Dr. Khalfan, VP, Financial Services & Operations provided very valuable and interesting insights on the dynamics of movement in oil prices and the prospects of Oman's macro-financial scenario.

In the presentations by other FSD officials, significant insights on the current macro-economic scenario were provided. The officials discussed the evolving global situation and its possible impact on the persistently low oil prices and the possible collateral distress it can impinge on Oman's fiscal space. The IMF projections on the rate of economic growth in Oman and the rest of the world as a consequence were also explained.

Additionally, the meeting also introduced the participants the basics of a newly developed macro-stress testing model that captures the effect of macro-economic developments on the default rates in the banking system. The results of the Top-Down stress testing exercise on the banking sector (with data as at the end of December quarter 2016) were also discussed during the presentations. The current good health of the banking sector was corroborated through these results. It was observed that even under quite adverse scenarios, banks' capital base and liquidity levels were seen to be satisfactory.

In yet another presentation, the FSD provided an overview of the forthcoming Bank Recovery and Resolution Framework in Oman. The participants were informed that this framework was an extension of an earlier framework to deal with Domestic Systemically Important Banks (D-SIBS) and is part of a series of steps taken by CBO to further strengthen the supervisory and regulatory architecture in Oman.

Meantime, a presentation providing some informative insights on the latest developments on Fin-Tech, its ecosystem, growth and its reach across the globe was held. In this presentation, the implication of Fin-Tech on the business of the financial institutions and banks in particular was highlighted. The use of Block-Chain Technology and the increasing adoption or use of Bitcoin as a medium of exchange was also discussed during the meeting deliberations.