Oman cautions banks to be extra vigilant on property, personal loans

A senior central banker in Oman has called on the country’s banks to be extra-vigilant about their exposure to sensitive sectors such as real estate as the Gulf state copes with the impact of lower oil prices.

Oman lacks the ample oil and fiscal reserves of its wealthy neighbours and its finances have been hit hard by the plunge in fuel prices since 2014.

Qais Al Yahyaei, head of the financial stability department of the Central Bank of Oman, made his comments at a meeting this week that assessed the vulnerabilities of the country’s financial system, according to a statement posted on the bank’s website.

Investors are concerned about the outlook for Oman’s economy, as it faces a current account and a fiscal deficit.

A Bank of America Merrill Lynch report said earlier this month that Oman’s twin deficits imply a need for material external financing to prevent sustained erosion in foreign assets and to defend the rial peg to the U.S. dollar.

Al Yahyaei was quoted as saying 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.”

His presentation also raised concerns on the concentration of loans, deposits, and borrowers in the banking sector. The statement did not provide more details.

The statement said data as of end-December 2016 showed that there was no immediate concerns on capital adequacy, liquidity, assets quality and profitability of the banks.

Oman’s government sold $5bn of international bonds earlier this month, completing its entire foreign borrowing plan for 2017 in a single issue.