Financial sector stable: Report

THE financial sector has been described as “sound and stable” during the subdued economic climate of last year which is expected to be maintained this year, according to the International Monetary Fund.
“PNG’s financial sector is sound and stable,” said the IMF in its consultation staff report while noting low credit growth and the commercial banks’ exposure through government securities. “Commercial banks continue to record positive balance sheets against a low number of non-performing loans. Credit growth, on the other hand, is low, but will pick up with the recovery in the economy.
“Commercial banks’ exposure to the government through their holdings of government securities accounts for nearly one third of their total assets and, although significant, is manageable.”
The report noted that initiatives by Bank of PNG to enhance supervision on selected areas were aligned with the IMF objectives.
BPNG “also share the staff’s view of the need to strengthen the macroprudential supervision of its central bank,” the report said.
BPNG’s three focus areas are:

• Establishing relevant data for macroprudential analysis;
• ensuring the availability of various macroprudential tools; and,
• Building the institutional and governance arrangements of the macroprudential authority.

“So far, the bulk of the focus has been on establishing relevant data for macroprudential analysis,” the report said.
“Furthermore, authorities are shifting to a risk based supervision regime for its banking industry and the superannuation and life insurance sectors.
“So far new prudential standards on corporate governance, capital adequacy and risk management have been released to the banking industry, savings and loans, superannuation and life insurance sectors.”