Background: The concept of insuring bank deposits has been there since the beginning of the 19th century, or even before. However many countries in the modern world have only adopted an explicit deposits insurance scheme after experiencing collapse of a major bank or a financial system crisis.
Legal Status: The Bank Deposits Insurance Scheme (BDIS) was formed and is regulated by virtue of Royal Decree No. 9/95 dated 26th March 1995 (with certain amendments to the Law in 2000 (RD 111/2000) and 2010 (RD 70/2010).
While the Central bank of Oman’s Board of Governors is the authority responsible of issuing the BDIS regulation, it is the Administrative Committee, which is responsible of managing the scheme’s operations.
Scheme Objectives: Deposit Insurance is one of the key elements in maintaining confidence in the banking system and promoting financial stability. It is an integral part of financial safety net, providing certain risk coverage for depositors, prompting savings and confidence in the banking sector.
Initial Capital: The initial Capital of OR. 10 million was paid by Central Bank of Oman and the Commercial banks operating in Oman. Since its formation, the BDIS funds have managed to grow from return on investments and the annual premiums that were collected, from member banks, based on 0.02% , then 0.03% and 0.05%, now, of banks total deposits obligations. CBO contributes 50% of banks’ contributions.
Membership: It is mandatory for all licensed banks receiving deposits to be member in the Bank Deposits Insurance Scheme (BDIS). Currently, there are 16 members of which 8 local and 9 foreign banks, namely:
Ahli Bank. Bank Dhofar. Bank Melli Iran. Bank Muscat. Bank of Baroda. Bank of Beirut. Bank Saderat Iran. Bank Sohar. Habib Bank Limited. HSBC Bank Oman S.A.O.G. National Bank of Abu Dhabi. National Bank of Oman. Oman Arab Bank. Qatar National Bank. State Bank of India. Standard Chartered Bank Oman Development Bank.
Bank Premium: The premiums collected are based on an ex-ante funding system i.e. the system is relying on the advance accumulation and maintenance of a fund to cover deposit insurance claims. Currently, member banks are paying 0.05% of the average annual total deposits.
Deposits Coverage: The deposits shall be eligible for compensation if they are Savings deposits, Current accounts, Call deposits, Time deposits, Government deposits, Trust & Pension funds deposits, and other deposits specified by Central Bank. The current ceiling of the reimbursement is at R.O. 20,000/-.
Investment Guidelines: The BDIS Law has permitted the BDIS fund to be invested in certain securities and shares – subject to eligible ones being compiled by the Administrative Committee and approved by the Board of Governors. There are sub-limits, set for some eligible categories.