was earned from domestic market operations due to higher level of government securities held by the bank and high interest rates on treasury bills ; interest expenditures were lower compared to 2002, due to limited involvement by the bank in the secondary market for treasury bills ; and generally expenditures were well controlled although significant costs were incurred in the areas of : – it management of systems ; – building maintenance ; – currency replenishment ; and – staffing costs - salaries and wages, and training. the way ahead honourable minister, the bank ’ s 2004 financial results would likely be affected by the current low interest rate environment and high liquidity situation that we confront since the beginning of the year. whilst we have rebuild our foreign exchange reserves, our interest earnings on them would be also affected by the low interest rates overseas and the appreciation of the kina exchange rate. it is therefore important that this dividend payment should not allow us to rest on our laurels and pat ourselves on the back. whilst we should take time to celebrate achieving such a result, we must also be mindful of our on - going duty to the government and the nation. there are still on - going work within the central bank to improve the design of our policies and their implementation. we are constantly striving to improve our operations to enhance efficiency in achieving our core objectives and functions by using the latest technology, follow international best practices, and continue to build our internal capacity. and indeed the brief but very significant visit by the deputy managing director of the imf, mr. agustins carstens, not only provided a strong sign of confidence on the government ’ s economic management, but also gave us the opportunity to discuss further technical assistance in various areas of the bank ’ s operations. let me mention some of the major tasks currently undertaken by the bank : • building up our capacity to supervise the financial system including life insurance and superannuation fund industries with external assistance ; • undertaking research work on the central bank ’ s operations and policies ; • implement an electronic registry system to help with our domestic trading of government securities ; • review of the exchange control regulations ; • drafting of the anti - money laundering legislations with government agencies ; and • involvement in the implementation of the png - adb microfinance project. these changes and the on - going work will ensure the central bank not only fulfills its mandate to the government and people of papua new guinea, but also allows us to be responsive to the everchanging vagaries of the world

we will make use of external parties from the private sector as well as the national authorities in order to speed up the process and, most importantly, to achieve the best possible assessment. the 80 or so people we have so far for this task are simply not enough. bis central bankers ’ speeches how long will the review take? it would be good if we could complete the review and the stress tests within a year. at the end of it, the banks should have recapitalisation plans. i would not be in favour of them improving their ratios simply by shrinking their balance sheets. this would reduce their scope for lending and basically undermine our monetary policy efforts. how great, in your view, is the need for recapitalisation? it is too early to say for sure. but my first impression is that the private sector can handle it in most cases. some estimates run to the billions. the huge sums doing the rounds in the press are, in my view, a complete exaggeration. how many supervisors will be working in frankfurt? that is still not clear. what is clear is that not all supervisors will be based in frankfurt. many of them will be in the same place as the bank headquarters. in the case of a large bank, a team could easily consist of 70 people, including representatives from the national supervisory authorities. the programme for unlimited purchases of government bonds ( omts ) seems to have played a large role in saving the euro. mario draghi misses no opportunity to emphasise the success of the omts. bundesbank president jens weidmann, on the other hand, is strongly against omts. what is your position? as you know, at the meeting of the ecb ’ s governing council where the matter was discussed, there was only one dissenting voice. in recent years, we have been on the brink of a dangerous downward spiral three times. first of all, after us investment bank lehman brothers collapsed, then just before we introduced the three - year ltros, and again in summer 2012, when we then announced the omt programme. thank you for your time, mr praet. bis central bankers ’ speeches