The New Oman Banking Law – Key Provisions

Oman has introduced comprehensive changes to banking regulation in the country through the recent enactment of the Banking Law (Royal Decree 2/2025) (the Banking Law), which repeals and replaces the previous Banking Law (Royal Decree 114/2000) (the Old Banking Law). Although the Banking Law retains many of the principles and provisions from the Old Banking Law, it introduces the supervision of digital and investment banks, clearly defines financial activities, significantly strengthens the financial oversight of the regulator and the regulation of licensed banks, enhances Islamic banking practices, establishes customer protection mechanisms and sets out in detail the penalties for non-compliance.

This article provides an overview of some of the key components of the Banking Law which will have implications for banking and financial institutions in Oman.

Increased Regulation of the Banking Sector

The Banking Law has expanded the regulatory framework of banking with the introduction of the concept of a “digital bank” which is defined as: “A bank that obtains a license to conduct Banking Activities through digital platforms or digital channels using modern technologies”. The Central Bank of Oman (CBO), as the regulator of the banking and financial services sector in Oman, will be responsible for organising and supervising digital banks, ensuring compliance with regulations to be issued by the Board of Directors of the CBO (Article 9 of the Banking Law). Investment banks will also be subject to regulation by the CBO including with the Securities Law (Royal Decree 46/2022) (Article 10 of the Banking Law).

Focus on “Financial Activities”

Article 136 of the Banking Law now specifically defines “financial activities” to include the following:

• financing and finance leases,
• financial services such as money changing, money transfers and cashing and collecting cheques,
• currency exchange,
• electronic banking and financial operating services,
• credit and financial information services,
• loan-based crowdfunding, and
• any other activities approved by the Board of Directors of the CBO.

Any of these activities may be conducted per Islamic Shari'ah principles, under regulations to be set by the Board of Directors of the CBO. Under Article 135 of the Banking Law, no person may engage in any financial activities without first obtaining the requisite license from the CBO.

Financial institutions are also under a strict confidentiality obligation which applies even after the termination of the relationship with the client. Disclosures are only permissible with the authorisation or instructions from the CBO, the client’s express consent, in compliance with provision of the Banking Law, and if required under a judicial ruling or order issued by a competent court (Article 143 of the Banking Law).

Regulation of Licensed Banks

The Banking Law introduces a requirement for a local bank in Oman to be in the form of a public joint stock company in order to apply for a banking license (Article 53 of the Banking Law).  There is also a shorter period of time in which the CBO must issue a decision to grant or refuse a banking license, which was previously 120 days under the Old Banking Law and is now within 90 days from the date of notification to the applicant the application is complete (Article 55 of the Banking Law).

Licensed banks must also obtain the approval of the CBO to carry out activities related to securities, such as: corporate and project financing, investment brokerage business, investment consultancy services, investment management, underwriting, underwriting of equity issuances, fiduciary services, custody, trust and brokerage services before obtaining the necessary license from the competent authority. The CBO shall issue instructions regulating this approval process (Article 60 of the Banking Law).

Islamic Banking

Regulations governing Islamic banking must align with the nature of Islamic financial principles and cover areas such as licensing, risk management, liquidity, investment, disclosure, and Shari’ah governance. The provisions of the Banking Law relating to Islamic banking remain largely unchanged from the Old Banking Law, however there are a couple of material updates to note which have now been codified into the legislative framework:

• Article 129 of the Banking Law states that the CBO may allow conventional banks to convert their Islamic windows into local Islamic banks through affiliated companies in accordance with the terms, conditions, and requirements to be decided by the Board of Directors of the CBO; and
• Article 130 of the Banking Law states that Islamic banks can now establish and own special purpose vehicles for the purposes of facilitating transactions in accordance with the provisions of the Shari’ah. This aligns with the current established practice within Oman.

Protection of Bank Customers

Article 98 of the Banking Law enhances the protection of bank customers in comparison to the Old Banking Law by introducing detailed statutory safeguards which ensure that licensed banks and their personnel must maintain customer confidentiality, except under the following circumstances:

1. based on express authorisation or instructions from the CBO,
2. based on the customer's written consent,
3. based on a judicial order or judgment issued by a court of competent jurisdiction in Oman,
4. if the disclosure is within the framework of providing credit and financial information services in accordance with the provisions of the Banking Law,
5. in accordance with the provisions of the Banking Law or the laws in force in Oman,
6. if the disclosure is made to the beneficiary due to the rejection of the check and to the extent of its value, and
7. if the disclosure is made for the purpose of recovering the debts of the licensed bank or establishing its rights in a legal dispute between the licensed bank and the customer arising out of a banking transaction.

This enhanced customer protection is also clear in the general principle set out under Article 99 of the Banking Law which states that licensed banks must not impose unreasonable restrictions preventing customers from accessing financial services with another bank.

The Banking Law also introduces a statutory obligation on licensed banks to provide the customer with sufficient information on its products or services and ensure that these are provided with a high level of quality, transparency, and fair treatment (Article 100 of the Banking Law). This includes a requirement for licensed banks to formulate terms and conditions that are clear and understandable to all categories of customers along with the publication of a price list for the products and services on offer (Article 101 of the Banking Law). There is also a prohibition on licensed banks from offering, providing, promoting, or advertising any services or products in a misleading or untrue manner (Article 102 of the Banking Law).

Penalties

The Banking Law has introduced new penalties as well as significantly increased penalty amounts as compared to the Old Banking Law. Articles 237, 238, and 239 of the Banking Law set these out in order to address the failure of complying with client confidentiality, incorrect reporting or obstructing inspectors, and false or misleading advertising of activities and the collection, use, or retention of client data for purposes other than its licensed activities.

Under Article 235 of the Banking Law, the fine for a violation of the prohibition on using the word “bank”, “masrif” or the phrase “banking business”, if the entity is not practicing licensed banking activities, is between OMR 1,000 - OMR 5,000 per day of the violation – previously under the Old Banking Law, this was a fine of between OMR 100 and OMR 250 per day of the violation. Likewise under Article 236 of the Banking Law, the penalty for carrying out banking business activity in Oman without a license has also increased to imprisonment of between 3 months - 3 years and/or a fine of between OMR 250 and OMR 600 per day of the violation.

Conclusion

The Banking Law significantly strengthens regulatory oversight, supervisory powers and customer protection within the banking sector in Oman. The implementation of clear rules on licensing, financial operations, Islamic banking, and the greater penalties for non-compliance with the Banking Law aims to ultimately enhance transparency and foster sustainable growth in the economy. All entities which are subject to the Banking Law must ensure compliance with its applicable provisions by June 2025.

For further guidance on how the Banking Law may affect your banking and financial practices and procedures, please reach out to our legal team for tailored advice and support.

This article was prepared with the assistance of Sara Al Hadhrami, trainee lawyer in CMS Oman.