Oman’s stimulus will soften coronavirus’ economic blow, but weaken banks credit profiles

Oman’s stimulus will soften coronavirus’ economic blow, but weaken banks credit profiles

The Central Bank of Oman's stimulus package that will inject RO8 billion ($21 billion) in the economy to reduce the economic effects of the coronavirus pandemic, will limit the economic blow of the coronavirus outbreak on the Omani economy, but weaken banks' credit profiles, a credit negative, according to Moody's Investors Service.. The central bank has also increased the regulatory cap on banks' loans-to-financing ratio.. The stimulus package allows banks to reduce their CCB by half to 125 bp.. The deferment of loan instalments for affected borrowers, as well as the six-month delay in the risk classification of loans for government projects, will reduce banks' immediate recognition of problem loans arising from coronavirus-related disruption.. Omani banks benefit from strong solvency buffers, including strong capital (14.4% tangible common equity to risk-weighted assets, as of December 2019) and healthy problem loan coverage (94% loan loss reserves to problem loans).. The central bank also reduced the interest rate on rediscounting of bill of exchanges and promissory notes.. The increased regulatory cap on banks' lending to financing ratio will also allow banks to meet cash calls from affected borrowers more easily..