The Central Bank of Oman was established in December 1974 and began operations on 1 April 1975. It replaced the Oman Currency Board as the principal currency authority in Oman.

The Central Bank of Oman is responsible for maintaining the stability of the national currency the Omani Rial and ensuring monetary and financial stability in a deregulated and open financial system. The capital base of the CBO which was one million Omani Rials at the commencement of operations in 1975, was strengthened over time and since April 2002 has remained at R0300 million. At the end of 2005, CBO's assets/liabilities totalled RO 1826.4 million.

The Omani banking system has experienced several mergers since the 1990s and as a result the number of commercial banks at the end of 2005 stood at 13, of which five are locally incorporated and eight are branches of foreign banks, together having a branch network of 329 branches. Local banks, in addition, have 10 branches and one representative office abroad. As at the end of 2005, there were also three specialised banks in operation, with a network of 26 branches. The CB O has approved the establishment of an additional local bank (Sohar Bank) and a branch of a foreign bank (Bank of Beirut) that are expected to commence operations by the end of 2006. In order to strengthen the financial position of licensed banks and enable them to face competition as well as fhttp://en.wikipedia.org/skins-1.5/common/images/button_bold.pnginance large projects, the minimum capital requirement for commercial banks was enhanced to RO50 million for local banks and RO10 million for foreign banks. The overall capital adequacy ratio of the commercial banks improved to reach 18.5 percent in 2005.

Oman (ⁱ/oʊˈmɑːn/ oh-MAAN; Arabic: عمان‎ ʻUmān), officially called the Sultanate of Oman (Arabic: سلطنة عُمان‎ Salṭanat ʻUmān), is an Arab state in southwest Asia on the southeast coast of the Arabian Peninsula. It is bordered by the United Arab Emirates (UAE) to the northwest, Saudi Arabia to the west, and Yemen to the southwest. The coast is formed by the Arabian Sea on the southeast and the Gulf of Oman on the northeast. The Madha and Musandam enclaves are surrounded by the UAE on their land borders, with the Strait of Hormuz and Gulf of Oman forming Musandam's coastal boundaries.

For a period, Oman was a moderate regional power, formerly having a sultanate extending across the Strait of Hormuz to Iran, and modern day Pakistan, and far south to Zanzibar on the coat of south-east Africa. Over time, as its power declined, the sultanate came under heavy influence from the United Kingdom, though Oman was never formally part of the British Empire, or a British protectorate. The Omani royal family claim that Oman has been ruled by the Al Said dynasty since 1744, although without substantial proof. Oman has long-standing military and political ties with the United Kingdom and the United States, although it maintains an independent foreign policy.

A central bank, reserve bank, or monetary authority is a public institution that manages a nation's currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the nation's monetary base, and usually also prints the national currency, which usually serves as the nation's legal tender. Examples include the European Central Bank (ECB), the Federal Reserve of the United States, and the People's Bank of China.

The primary function of a central bank is to manage the nation's money supply (monetary policy), through active duties such as managing interest rates, setting the reserve requirement, and acting as a lender of last resort to the banking sector during times of bank insolvency or financial crisis. Central banks usually also have supervisory powers, intended to prevent commercial banks and other financial institutions from reckless or fraudulent behavior. Central banks in most developed nations are institutionally designed to be independent from political interference.