fx limits, conditions imposed on a bank ’ s license, and any other relevant bpng instructions while financial stability is the supervisor ’ s primary concern and monitors the present and future viability of the institution through the use of financial statements the auditor provides, the auditor, on the other hand is concerned with the institution as a “ going concern ” and expresses professional view on the “ true and fairness ” of the institution ’ s condition expressed in its account. at the end of the day, both the supervisor and the auditor is looking at the same coin but from different sides. this commonality therefore justifies the position for closer understanding and knowing of each other ’ s concerns, and the need to maintain good working relationship and liaison between supervisor and external auditors in order to promote a sound and stable financial system. it is in this light that i feel the need for auditors and accounting associations of png to come down hard on members who do not properly carry out their tasks, be it deliberate or otherwise. sanctions for such behaviour be punitive and must be enforced and not for show only. our experiences with some of your members in their roles as external auditors leave a lot to be desired. at the very least annual public advertisement of registered auditors is a necessity. how will anyone know if a firm or an individual is a registered member of the png auditors charter? is this information readily available?

making loans to borrowers. almost all the funds raised by our commercial banks are done so through deposit takings domestically. deposits comprise over 80 percent of our commercial banks ’ liabilities, much of it in kina. foreign currency deposits are only a small component of the banks ’ deposit base. as at the end of december 2008, foreign currency deposit was around 9 percent of total deposits. the commercial banks are generally sound with high capital adequacy ratios. in 2008, their capital adequacy ratio was 25 percent, higher than our limit of 12 percent ( see chart 1 ). the banks have no exposure to sophisticated financial products such as mortgage - backed securities that are linked to the demise of the sub - prime mortgage market. the high level of liquidity in the banking system also provided sufficient funds for commercial banks to operate without resorting to borrowing from the international financial system. despite the high level of liquidity, the commercial banks ’ lending is prudent with low levels of non - performing loans. in 2008, non - performing loans totaled k70 million, down from k277 million in 2001 ( see chart 2 ). lending also comprises a small share of the banks ’ assets, about 35 percent. the banks are well managed and closely regulated by the bank of png. in addition, the two subsidiaries of australian banks have in place guarantees from their parent banks ( letters of comfort ) for any lending in excess of prudential exposure limits set by the bank of png, giving confidence to the stability of the financial system. both these banks ’ parents have double “ a ” credit ratings by standard and poor ’ s. however, the financial institutions and companies most likely to be affected by the crisis are the superannuation funds and png dual - listed companies in overseas stock markets. the two major superannuation funds, the nambawan super ltd and nasfund ltd, have some of their assets invested in offshore equities, while the rest are invested in commodity - based stocks that are dual - listed in png and overseas markets. they have reported positive returns in 2008 and remain positive and confident, though with lower returns projected for 2009. indeed, much credit must be given to the financial sector reforms introduced by the government in 2000, which created an independent central bank and introduced improved supervision of the financial system. the reforms saw much needed changes done to strengthening our financial sector after the excesses and mismanagement of the 1990s ( see chart