Insight: the legal and regulatory framework governing Islamic finance and markets in Oman

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Introduction

Legislative and regulatory framework

i Legislative and regulatory regime

Oman’s Islamic finance industry has rapidly become an actively regulated sector of the country. The level of degree of regulation correlates with the rapid growth of Oman’s Islamic finance industry; in 2019, the Omani Islamic banking sector became the world’s 15th-largest, according to statements by Central Bank of Oman (CBO) senior officials.²

Islamic banking was formally introduced in Oman by Royal Decree (RD) No. 69/2012, which amended the Banking Law³ by adding a new chapter dedicated to Islamic banking. Subsequently, the CBO issued Circular IB 1/2012, promulgating the Islamic banking regulatory framework (IBRF), which is a sophisticated regulatory guideline setting out the requirements and conditions for the undertaking of shariah-compliant commercial and investment banking activities and the offering of shariah-compliant products in Oman.

The IBRF regulates the following areas: licensing requirements, general obligations and governance, accounting standards and auditor reports, supervision and control, capital adequacy, credit risks, market risks, operational risks, liquidity risks and miscellaneous matters. The IBRF provides for the right to set up fully fledged Islamic banks and Islamic windows of conventional banks, and it sets out the process and requirements to be followed when applying to the CBO for an Islamic banking licence. In this respect, it is to be noted that…