musch, former secretary general of the basle committee. i hope this institute will make an important contribution to disseminating best supervisory practice and supporting the effort to strengthen banking systems. i now turn to the lessons to be learned in the industrial countries from the rather extraordinary episode of market turbulence that began in mid - august. the russian debt moratorium of 17 august sparked a widespread flight to quality, which was followed by a generalised drying - up of liquidity in many markets. this prompted fears that lenders would ‘ disengage ’, leading to a credit crunch. fortunately, markets have more recently gained a certain measure of stability. but we should certainly try to understand what went wrong and how we can avoid such episodes in the future. one problem was that lenders had unrealistic expectations about the extent to which their loans to emerging markets would be protected. it is therefore important that cross - border lending be assessed on a stand - alone basis, and that supervisors make sure that the pricing and management of such exposures are not undertaken on a false basis. in other words, a tightening - up of credit risk procedures is called for. another source of difficulty was that the models used to assess market risk were based too simplistically on established statistical correlations. they did not take adequately into account other types of risk, such as liquidity, volatility and event risk. widely used value - at - risk models caused financial intermediaries to liquidate assets when volatility in asset prices increased. this selling, in turn, caused volatility to increase further and resulted in additional selling. the fact that most market participants used the same basic model led to common reactions, amplifying herd - like behaviour. consideration therefore has to be given to ensuring that common behaviour by market participants does not exacerbate market instability. – 3 – it has to be recognised that all model - based approaches to controlling market risk embody assumptions, explicit or implicit, about market liquidity. the drying - up of liquidity in periods of market turbulence, as market participants seek to disengage from exposure, invalidates a basic premise on which risk management is built. it is therefore all the more important that var - based approaches to risk containment are supplemented by stress - testing. how do you think national governments have fared in implementing bis rules? the scorecard in this connection is not very good. if one looks back at the history of the past 10

speech by : loi m bakani cmg, governor, bank of png at the uncdf 50th anniversary 19 january 2017 ladies and gentlemen, it is my pleasure to address you all at this momentous occasion marking uncdf ’ s 50th anniversary. the bank of papua new guinea has had a close relationship with uncdf through the pacific financial inclusion programme ( pfip ) since its inception in 2008. i would like to share with you some of pfip ’ s highlights over the past 9 years. on a regional level, pfip has been instrumental in supporting the role of the central banks in driving the financial inclusion agenda, and actively contributes to the pacific islands regional initiative, a knowledge - sharing platform for the central banks in the pacific region. by the end of september 2016, pfip had reached an impressive cumulative total of over 1. 1 million clients across the pacific, already surpassing the programme ’ s 2019 goal of 1 million clients. these clients are now connected with financial service providers through a variety of financial services including bank accounts, mobile money, micro insurance, microfinance and more. closer to home for us, in papua new guinea alone, pfip partnerships have led to over 400, 000 clients receiving some form of financial service. in papua new guinea, pfip has been supporting the bank of png and the centre for excellence in financial inclusion through support for development and implementation of the country ’ s national financial inclusion strategic plans, the second of which ( spanning from 2016 - 2020 ), you may be aware, was launched recently in december 2016. this new plan has the ambitious target of reaching 2 million more unbanked lowincome papua new guineans, 50 % of whom are women, by 2020. bima is one example showing the tremendous need and potential for financial service in papua new guinea. a recent entrant into the insurance market, bima provides convenient, affordable life and hospitalization insurance cover via a mobile platform to nearly 400, 000 often low - income, financially underserved papua new guineans, the majority are receiving the economic safety net of insurance cover for the first time. pfip ’ s investment grant helped bima expand outreach in the highlands region, reducing delivery costs and improving customer service through and expanded agent network. pfip is currently working with the with department of education, provincial government and bank of png to develop a pilot for financial education integration into technical and vocational