CENTRAL BANK CHIEF REAFFIRMS OPPOSITION TO ISLAMIC

C O N F I D E N T I A L MUSCAT 000245

SIPDIS

SIPDIS

STATE FOR NEA/ARP, EEB/IFD/OMA
TREASURY FOR VALVO
COMMERCE FOR COBERG

E.O. 12958: DECL: 03/11/2017
TAGS: EFIN ECON MU
SUBJECT: CENTRAL BANK CHIEF REAFFIRMS OPPOSITION TO ISLAMIC
BANKING

REF: 06 MUSCAT 1690

Classified By: Deputy Chief of Mission Alfred F. Fonteneau, reasons 1.4
b and d


1. (U) Central Bank of Oman (CBO) Executive President Hamood
Sangour al-Zadjali reaffirmed his institution's opposition to
permitting Islamic banking operations in Oman during a recent
interview with the Middle East Economic Digest. Bucking a
regional growth trend in offering such services, Zadjali
remarked, "We shall not allow it. We believe that banks
should be universal. We won't allow specific banks."


2. (SBU) Zadjali's comments echo his previous public
statement on Islamic banking, as reported reftel. During the
September 2006 Economist Business Roundtable event, Zadjali
flatly stated that Islamic banking was not permitted in Oman,
and that the CBO had no plans to permit it in the near-term.
He alluded to such banks as using the "Islamic" label as a
marketing tool and said, "At the end of the day, Islamic
banks face the same expenses for borrowing as other financial
services."


3. (C) Comment: The Executive President's position on
Islamic banking is reflective of the close eye the regulator
intends to keep on the Sultanate's banking industry. Aside
from the CBO's interest in keeping the sector free from
religious connotations, the Bank is focused on ensuring that
all commercial banks in operation remain healthy and in this
regard, remains concerned that Oman may become "overbanked"
by permitting the establishment of Islamic banking. End
Comment.
GRAPPO