(Corects name to Al Izz Islamic Bank in second paragraph from
Al Izz International Bank)
DUBAI, April 2 Oman's central bank has granted
Islamic banks a one-year relaxation of rules on the amount of
foreign assets which they can hold, to give time for Islamic
financial instruments to be developed domestically.
Oman's first full-fledged Islamic banks, Bank Nizwa
and Al Izz Islamic Bank, were established
late last year and are now starting to operate as the country
introduces Islamic finance.
Under rules announced by the central bank in December, the
two banks can hold no more than 40 percent of their net worth in
the form of foreign currency-denominated assets.
This threatens to hurt their profitability, however, because
Oman has not yet developed a market in sukuk (Islamic bonds) or
other sharia-compliant instruments which the banks could use to
manage their liquidity.
Central bank chief Hamood Sangour al-Zadjali told Reuters on
Tuesday that for the first six months, the limit would be raised
to 75 percent, and it would be 50 percent for the following six
months. Then the 40 percent limit would apply.
"After that they can have local sukuk and they can be
building local credits," Zadjali said at a meeting of Arab
central bankers and finance ministers in Dubai.
"It's a definite period, it's one year...until they set the
Last year, the two lenders raised a combined 100 million
rials ($260 million) through their initial public offers of
shares, with Bank Nizwa having 150 million rials in paid-up
capital and Al Izz having 100 million rials.
Oman's first sovereign sukuk issue is expected in about a
year; the finance minister said earlier on Tuesday that the
issue would not occur within 2013.
The rules also state that Islamic banks are allowed to hold
a maximum of 30 percent of their net worth in sovereign sukuk,
so pressure will remain on the industry to develop other
rial-denominated Islamic products to manage liquidity.
Islamic banks in Oman have limited investment options partly
because the country's Islamic banking rules essentially ban the
use of commodity murabaha, a common tool used by Islamic banks
around the world to invest surplus funds.
(Reporting by Martin Dokoupil; Writing by Bernardo Vizcaino;
Editing by Andrew Torchia)