Legal Overview on Oman’s new Banking Law: Royal Decree 2 of 2025

Oman’s new Banking Law: Royal Decree 2 of 2025

At the start of 2025, the banking and finance sector of Oman has faced radical changes following the issuance of four new Royal Decrees expected to change the landscape of its regulation. Effective 1 January 2025, the newly introduced Banking Law (Royal Decree No. 2/2025) superseded the earlier Banking Law (Royal Decree No. 114/2000), replacing it entirely and introducing vast reforms aimed at modernizing the country's banking system.

In addition, Oman has announced a law regarding the promulgation of the system of Central Bank of Oman (CBO) through the Royal Decree No.3/2025, while on the other side, Royal Decree No.4/2025 and the Royal Decree No. 5/2025 have touched the appointment issues of new board members and also the Governor to the Central Bank of Oman respectively.

These developments present a revolutionary point for the country's financial sector, and Oman's banking regulations would align with best international practices. Furthermore, it reinforces the role of the Central Bank in financial stability.

New Banking Law

The former Banking Law dates back to 2000, with the last amendment in 2012, and has supported the sector for more than two decades. Still, the banking environment is undergoing rapid changes and requires a fundamental reform. New Banking Law, Royal Decree No. 2/2025, will be an important step toward the modernization of Oman's banking sector, towards better regulatory frameworks, and the promotion of sustainable economic growth.

The new provisions shall be in force as of 1 January 2025, and it causes even substantial implications for financial institutions operating in Oman. For example, all licenses, permits, and approvals issued by the Central Bank of Oman (CBO) before its entry into force still remain in effect until expiry. Moreover, all licensed entities must be compliant with the new Banking Law within six months from the date of promulgation.

The CBO's Board of Directors can extend this reconciliation period for two additional terms if necessary.

These transitional provisions are intended to ensure that the transition to the new legal framework is smooth and that there is continuity in the operations of financial institutions.

 Key Features of the New Banking Law

The new Banking Law has some very notable features that reflect Oman's commitment to adopting global best practices in the financial sector:

I.     Strengthened Regulatory Framework

The revised law enhances the regulation power of the Central Bank of Oman; therefore it has an oversight and regulatory system over financial institutions. Now, CBO is more independent to respond to the shift in financial market.

II.     Compliance and Governance Requirements

Compliance and governance requirements have been made stricter for financial institutions to ensure transparency, accountability, and risk management. Banks need to adapt their operations to these new standards to retain their licenses.

III.    Consumer Protection

The law has placed emphasis on consumer protection, ensuring that the interests of customers are protected. New mechanisms have been introduced to handle disputes, promote fair practices, and prevent abusive conduct in the financial sector.

IV.    Innovation and Financial Technology (FinTech)

The law acknowledges the increasing relevance of financial technology, promoting innovation in the banking industry. It allows for provisions in support of developing digital banking services and FinTech initiatives, coupled with strong regulatory oversight.

The New Central Bank of Oman Law (Royal Decree No. 3/2025)

Another critical component of this reform is the Central Bank of Oman Law, outlining the structure, responsibilities, and governance of the CBO in further detail. The law also defines the CBO as a separate legal entity possessing financial and administrative independence, which gives it the autonomy to effectively regulate Oman's banking and monetary system.

Important Provisions of the CBO Law

i.      The headquarters and principal safes of the CBO shall be located in Muscat.

ii.    The CBO may set up both domestic and foreign branches that would enable it to carry out its functions.

iii.   The law describes the mandate of CBO about maintaining price stability, a sound financial system and supports economic development.

iv.   Board of Directors would take the most important role in decision-making and also supervision.

v.    New Governor and Appointments for Board of Directors.

Along with the newly enacted laws, Royal Decree No. 4/2025 and Royal Decree No. 5/2025 appointed the Board of Directors with new members along with the new Governor of Central Bank of Oman, bringing forward experienced professionals leading Oman's financial sector into this new era.

Board of Central Bank of Oman

There are new board members, consisting of a mix of professionals from diverse sectors, with a comprehensive oversight and governance system in place to manage Oman's monetary policy.

i.      The Minister of Economy – Deputy Chair

ii.    The Governor of the Central Bank of Oman

iii.   The Undersecretary of the Ministry of Finance

iv.   The President of the Financial Services Authority

Ahmed bin Jaffer bin Salim Al-Musalmi is appointed as the new Governor of the Central Bank of Oman. With vast experience in the financial sector, the new governor's leadership is bound to play a pivotal role in the implementation of the new laws and ensuring stability and growth of the banking system of Oman.

What's Next?

Although the specific details of the new Banking Law and the Central Bank of Oman Law will not be published before next week through the Official Gazette, it would be clear how these changes shape the future outlook of Oman banking and finance landscape.

Financial institutions must take proactive steps to ensure compliance with the new regulatory framework. This includes reviewing their existing operations, updating policies and procedures, and engaging with the Central Bank to align their activities with the new laws.

The new laws are a boon for businesses and consumers alike, with increased transparency, better regulatory oversight, and increased confidence in Oman's financial system. Innovation and technology also present exciting opportunities for growth in the FinTech sector.

Conclusion

The issuance of these four Royal Decrees at the beginning of 2025 marks a new chapter for Oman's banking and finance sector. In modernizing its banking laws and enhancing the autonomy and governance of the Central Bank of Oman, the Sultanate is laying the foundation for a more robust, transparent, and competitive financial environment.

As the full text of the new laws becomes available, further insights will emerge on how these changes will affect the industry in the short and long term. In the meantime, financial institutions and stakeholders must prepare for a period of adjustment as Oman's banking system transitions to this new regulatory framework.