Financial system regulation and stability is one of the key responsibilities of the Bank of Papua New Guinea. The Central Banking Act (as amended 2024) sets one of the three secondary objectives of the Bank to "ensure financial stability" for the advancement of the people of Papua New Guinea. The Bank is responsible for overseeing and regulating financial markets and institutions to ensure stability, protect consumers from bad actors and to promote fair and transparent financial practices, including greater financial inclusion.
The PNG financial system is valued at over K70 billion, with over 75 percent held by the banking industry and the rest primarily in superannuation. The financial sector's importance in facilitating the efficient flows of goods and services, imports and exports, cannot be understated and it is a key indicator of the health of the PNG economy.
We are committed to ensuring a modern, reliable and trustworthy financial system for our households, communities, and businesses. We do this by setting licensing requirements, promoting proper standards of conduct in our licensed institutions, developing and issuing prudential standards and guidelines for sound and prudent business practices, and ensuring regulated institutions comply with the relevant legislation and prudential standards through effective supervisory activities.
We work closely with the Financial Analysis and Supervision Unit to ensure PNG's financial system is protected from bad actors and those who would threaten the integrity of our systems through money laundering and illegal financing activities.
Regulated financial institutions, which are the actors in the financial system, comprise authorized deposit-taking institutions, authorized superannuation funds and licensed life insurance companies.
Key Activities in Regulation and Supervision
Licenses and Approvals
The Bank is responsible for assessing and approving the licenses for all entities wishing to engage in Papua New Guinea's financial system. This includes ADIs (commercial banks, microfinance organisations, payment service providers, money exchangers etc.), superannuation funds and life insurance companies.
In 2024 we welcomed three new commercial banks to Papua New Guinea, bringing the total number to seven. This is a strong vote of confidence in our economy and we are pleased to note that all three have their foundations in PNG.
Supervisory Enforcement Actions
The Bank undertakes regular onsite prudential reviews of licensed institutions. These reviews verify that adequate policies, procedures and controls exist at the institutions; determine whether information reported by the institutions is reliable; monitor how effectively the institution has followed up on any previously raised concerns; and obtain additional information on the institution and its related companies that is needed to assess the condition of the institution. These reviews help ensure the integrity of our financial system and trust in its operation.
The Bank also monitors and receives complaints from the public on the operations of regulated institutions. These complaints are addressed with the institution in question and followed up to ensure any issues are addressed satisfactorily. It also monitors compliance with the Superannuation Act 2000 and actively prosecutes companies that fail to meet their obligations to employees.
Statutory Administration, Management and Liquidation Activities
From time to time the Bank is required to step in and oversee the operation of institutions that threaten to disrupt financial stability when they are in distress or failing. The Bank uses its powers set out in the Banks and Financial Institutions Act to help manage and resolve issues when they arise. This includes acting as liquidator for regulated institutions where necessary.