Islamic Banking Law Decree in the Sultanate of Oman

Abstract

This article discusses the Islamic banking law royal decree of 6 December 2012 in the Sultanate of Oman. The Islamic Banking Law leaves much to the Islamic Banking Framework (which has been issued) and future regulations, circulars and guidelines. But, laying the foundation for the development of the Islamic banking industry in Oman, the Islamic Banking Law does specifically address four critical substantive structural elements, as well as a few procedural elements of the transactional structure of Islamic banking in Oman. This Client Alert focuses on those four areas, leaving discussion of the Islamic Banking Framework to future Client Alerts.

The four substantive structural elements are: (i) the transactional base of Islamic banking in the Sultanate, and some fundamental requirements pertaining to that transactional base; (ii) the status of Islamic banking and Islamic banking transactions in terms of taxation, land law constraints and the provisions of other areas of substantive law; and (iii) two matters pertaining to Shariʿah supervisory boards, one at the level of the individual banks and one at some higher level.

The procedural matters pertain to: (a) the obligation of the Board of Governors of the Central Bank of Oman to issue the Islamic Banking Framework; (b) the obligation of the Central Bank of Oman to license Islamic banks and Islamic windows at conventional banks; and (c) interpretation of the Islamic Banking Law, particularly as its provisions may conflict with other laws, rules, regulations and Royal Decrees. As is so often the case, a great deal of substantive law impact is embedded within the procedural provisions.

Each of these structural elements and procedural matters is discussed.

Keywords: Islamic banking, banking, Islamic finance, corporate governance, Shari'ah

JEL Classification: F00, F02, F30, F33, F34, G30, G32, G38