Omani lender Bank Dhofar has completed a preliminary study on a possible merger with Bank Sohar.

It is awaiting feedback from Bank Sohar on a proposed a preliminary share swap ratio, the lender said in a bourse filing.

Combined, the lenders are expected to have around $10bn in assets, creating the second largest bank in the country. Bank Muscat is currently the largest bank, followed by National Bank of Oman and Oman International Bank.

The proposal will be subject to the completion of due diligence exercise obtaining approvals.

Regional banks are encouraged to merge in order to create larger entities better able to cope with shocks, as regulatory changes are forcing them to have larger amounts in their capital reserves. Oman’s conventional banks are also increasingly facing competition from Islamic banks.