loi m bakani : financial system reform in papua new guinea address by mr loi m bakani, acting governor of the bank of papua new guinea, at the launch of the fincorp downscaling initiative closure meeting, 23 june 2005. * 1. * * acknowledgement chairman of fincorp mr kerengua kua, staff of fincorp and mcc. thank you for giving me the honour to address the launch of the downscaling initiative closure today. firstly, on behalf of the microfinance steering committee ( msc ) and the bank of png as an executing agent of the microfinance & employment project, i would like to acknowledge and thank those involved in initiating this downscaling program, namely ; the staff of mcc, the staff & management of finance corporation limited ( fincorp ), and last but not the least the 500 or so micro entrepreneurs under the liklik bisnis finance loan program. this is another milestone in the development of microfinance in png, with a product provided based on mutual trust. 2. introduction let me congratulate you all for the success in running and expanding this program for one year now. like all other developing countries, png is constantly challenged to provide solutions as to how best it can wrestle the problems associated with poverty and lack of employment opportunities. png ’ s 5 million population of which 80 percent live in the rural areas have been denied development opportunities because of unfair or uneven distribution of the country ’ s financial resources & limitation in infrastructure developments. lack of serious attention to the declining state of infrastructure has forced many of the rural dwellers to migrate to the urban centres in search of employment opportunities and services of urban dwellings. with lack of education and entrepreneurial skills, many could not find jobs and had to resort to crime and other illegal activities as a means to survive. in addressing the lack of financial services to the rural population, the bank had agreed to be a party to the development of the microfinance sector, although is outside the core functions of the bank. we see this new development as an important milestone in the development of the financial system in png. this industry will complement the financial services provided by the existing financial institutions, but with different scope and mandate. we are encouraged by the huge interest in the microfinance sector as evidenced by the growth of the current two ( 2 ) microfinance institutions, namely, the wau microbank and the png microfinance limited

result in excessive risk weights compared to the economic risks of securitisation tranches, particularly for retail and mortgage portfolios. ” – this particular bank happened to incur $ 24. 7 billion in losses from cdos during the crisis. 5 • another bank wrote : “ if adopted, the current proposal for securitisation will materially impair the ability of banks to distribute risk from their own balance sheets into the calculations of costs are based on laeven, l and f valencia ( 2013 ) using data from the banking crisis database and calculations of the bis and the riksbank. laeven, l and f valencia ( 2013 ) “ systemic banking crises database ”, imf economic review 61 ( 2 ), 225 – 270, imf. output losses are computed as the cumulative sum of the differences between actual and trend real gdp over the crisis period in relation to pre - crisis gdp. basel committee on banking supervision ( bcbs ) ( 2010 ) an assessment of the long - term economic impact of the new regulatory framework, august. the loss of output represents referred to represents the median cumulative discounted output loss reported by a number of academic studies assessed in the study, measured over the period from the peak to the end of the crisis. the output loss does not include permanent losses in gdp, i. e. where the gdp trend does not recover to the pre - crisis level. the bank stating this was merrill lynch. source : fcic. bis central bankers ’ speeches capital markets. ” – this bank incurred usd 13 billion losses in q1 2008 and usd19 billion in writedowns on real estate and related structured credit positions. 6 i can assure you that there are many more similar examples to quote – the message being that the proposed reforms were overly restrictive, would damage the market and reduce activity. this illustrates that we need perspective when assessing the feasibility of reforms. to sum up so far : yes, there has been a strong regulatory reaction to the crisis, but as i see it, this is appropriate, given – the pre - crisis regulatory framework, – the costs crises give rise to, and – the efforts that the basel committee has made to mitigate risks of unintended consequences, the problem is that myopic observers tend to forget these aspects. are we there yet? remaining challenges? i would now like to change perspective slightly and ask, are we there yet? have our efforts done the trick, or are there still challenges to be tackled