New licensing framework for credit rating activities in Oman

MUSCAT: Oman has introduced a regulatory framework governing credit rating activities as part of newly issued Executive Regulations of the Securities Law, requiring credit rating providers operating in the Sultanate to obtain a licence from the Financial Services Authority (FSA), in a move expected to strengthen transparency and investor confidence as the country's capital market expands.
Under Article 95 of the regulations, no credit rating activity may be conducted without an FSA licence. The rules define the activity broadly, covering assessments of the creditworthiness of companies, financial institutions and governments, as well as the credit risks associated with securities, debt instruments and structured finance products.
International credit rating agencies that do not maintain offices or branches in Oman and wish to provide services in the Sultanate are treated differently. Under Article 104, such agencies are exempt from establishing a local company or representative office or branch and from the licensing procedures, subject to a decision by the FSA Council identifying the eligible international agencies.
The new framework comes as Oman seeks to broaden and deepen its capital market, with reliable independent assessments of credit risk potentially playing an important role in expanding debt-market activity, facilitating investor due diligence and reducing information asymmetries between issuers and investors.
Credit rating agencies may issue and publish ratings through various channels, including providing them to subscribers or clients for specified fees. The regulations stress that ratings constitute professional opinions on credit risk rather than direct investment recommendations.
Licensed agencies will be required to undertake comprehensive analysis of financial and economic information and relevant macroeconomic factors, including financial performance, capital structure, liquidity and leverage. They must also provide reports and information on issuers' creditworthiness to support investment decisions and enhance market transparency.
The regulations set a minimum proposed capital of RO 2 million ($5.2 million) for companies seeking a credit-rating licence and require licensed agencies to be entered in a dedicated register maintained by the FSA.
For locally licensed agencies, the regulations impose detailed standards intended to protect the integrity and independence of ratings. Agencies must ensure adequate resources and information, use systematic methodologies, avoid misleading assessments, protect confidential information and maintain independence and objectivity.
They must also establish mechanisms to prevent conflicts of interest and ensure analysts have appropriate professional qualifications and experience. Managers and senior analysts must have at least five years' practical experience in the financial sector, while licensed agencies must establish a professional affiliation with a reputable global rating agency with at least 10 years' experience.
The new framework provides a clearer regulatory foundation for credit-rating activity in Oman, potentially supporting the development of a more sophisticated debt market and helping attract institutional and international investors seeking greater transparency and comparability in assessing credit risk.