At the same time, insufficient progress has been made in creating a European banking market. Euro area banks largely operate in their home markets, leading to overcapacity and making the Union more susceptible to fragmentation.
The successful aversion was also due to the following factors: •  Lending by the commercial banks virtually funded domestically by deposits from the public;  •  The banking system is well funded with ample liquidity and has a stable interest rate environment;  •  Effective financial system supervisory framework which emphasis on the maintenance of capital adequacy, low level of non performing loans, good corporate governance and management gave confidence to the economy; and  •  Sound fiscal management by the government, including debt retirement program provide private sector confidence;  Improvement in the sovereign risk rating of PNG from BB to BB+.