Omani banks’ large exposure to the real-estate sector, according to the Central Bank of Oman (CBO), could leave them vulnerable to a weakening property market. In its Financial Stability Report, the central bank said banks have substantial direct and indirect exposure to the real-estate sector and this is a potential source of vulnerability. Real estate accounts for over 30% of the banking sector’s total lending portfolio, which, the CBO said, is considered large. A weakening real-estate market could, therefore, expose the banking sector to considerable risks,” the CBO added. It said early signs of weakness in some GCC countries and declining rents in Oman suggest a need for banks to work out a strategy to suitably diversify their portfolios to protect themselves from asset price shocks in the real-estate market. Moreover, the CBO said, high exposure of Islamic banks to the real-estate sector warrants a review of lending policies and practices of Sharia’a-compliant finance institutions. (Muscat Daily)