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Establishment of the Monetary Authority of Singapore 1st Jan 1971

The Monetary Authority of Singapore (MAS) is Singapore’s de facto central bank and regulator of the financial sector. It was established by the Monetary Authority of Singapore Act of 1970 and began operation on 1 January 1971.[1] The authority’s main functions are: to govern the nation’s monetary policy; act as the government’s banking and financial agent; manage the foreign reserves; regulate, supervise and monitor Singapore’s banking and finance sectors; and foster the growth of Singapore’s financial industry.[2] However, the responsibility of issuing Singapore’s currency still lay with the Board of Commissioners of Currency Singapore until it merged with the MAS in October 2002.[3]

Prior to the creation of the MAS, the various monetary functions associated with a central bank were managed by a number of different government departments and agencies. The Commissioner of Banking and the Commissioner for Finance Companies were responsible for the regulation and supervision of banks and finance companies. The Exchange Control Department oversaw all foreign exchange matters, while the Department of Overseas Investment was in charge of the government’s external assets. The Accountant-General’s Department handled the sale of treasury bills, controlled domestic loans, managed the clearing house system and acted as the lender of last resort in the banking system. These government bodies were directed and coordinated by the Ministry of Finance (MOF), and would meet weekly at MOF to discuss and decide on the country’s monetary and financial policies.[4] During periods of crisis, additional meetings would be held and ad hoc working groups convened.[5]

The case for establishing a central bank in Singapore was raised by then Minister for Finance Goh Keng Swee in his speech to the Economic Society of Singapore on 20 September 1969. In his speech, Goh noted that Singapore’s monetary system was an “untidy” one, although the system was doing well and was able to manage the money supply effectively thus far. Hence, Goh felt that it was necessary for Singapore to set up a central bank to bring the various departments under one roof for administrative orderliness. A single body would not only establish purpose and direction for all monetary matters, it would also raise the level of professional expertise on monetary affairs and improve the decision-making process, especially in times of crisis.[6]

Goh put forth the Monetary Authority of Singapore Bill, which proposed the establishment of the MAS, for its first parliamentary reading on 22 July 1970.[7] On 2 September that same year, Hon Sui Sen, who succeeded Goh as Minister for Finance, presented and defended the bill at its second parliamentary reading. Hon noted that while the various government organisations were managing Singapore’s monetary system well, “the increasing complexity of modern banking and monetary management ma[de] it necessary to streamline the system”. The establishment of the MAS was, therefore, necessary to “enable a coherent and uniform policy to be developed for all monetary matters” and to develop expertise in central bank operations.[8]

During the second reading of the bill, Hon also listed the powers, duties, functions and assets of the government to be transferred to the MAS as part of the centralisation process. As a banker and financial agent to the government, the MAS would issue demand drafts and make remittances, accept government deposits, and manage the government’s public debt and external assets. In addition, the authority would also implement the Local Treasury Act and the Development Loans Act of 1967 for the issue, purchase, sale, discount and redemption of government treasury bills.[9]

In order to regulate and supervise the financial sector, the MAS would exercise authority under the Banking Act of 1970, the Finance Companies Act of 1967 and the Exchange Control Ordinance of 1953 over a wide range of financial matters. These included licensing of financial institutions; enforcing the cash-reserve ratio and the liquid asset ratio in the banking system; advising banks on interest rates for deposits and loans; regulating lending activity; and purchasing gold and foreign currencies. The MAS would also be designated as the lender of last resort and would be allocated a paid-up capital of S$30 million.[10]

The Monetary Authority of Singapore Bill was passed by parliament on 2 September 1970,[11] and the Monetary Authority of Singapore Act came into force on 26 December that same year. Following the enactment of the act, the MAS commenced operation on 1 January 1971.[12] As stipulated in the MAS Act, the authority is governed by a board of directors, which is chaired by the Minister for Finance with the Permanent Secretary (Economic Development) of MOF as his deputy. Hon Sui Sen and George Edwin Bogaars were appointed as the board’s first chairman and deputy chairman respectively.[13]

References
1. Republic of Singapore. Government Gazette. Subsidiary Legislation Supplement. (1970, December 24). The Monetary Authority of Singapore Act (Commencement) Notification 1970 (Sp.S 341/1970, pp. 1301–1302). Singapore: Government Printers. Call no.: RSING 348.5957 SGGSLS.
2. Republic of Singapore. Government Gazette. Acts Supplement. (1970, November 6). The Monetary Authority of Singapore Act 1970 (Act 42 of 1970, pp. 451–467). Singapore: Government Printing Office. Call no.: RSING 348.5957 SGGAS; Monetary Authority of Singapore. (1972). Annual report 1971 (p. 24). Singapore: The Authority. Call no.: RCLOS 332.495957 MASAR.
3. Singapore. Parliament. Parliamentary Debates: Official Report. (1970, September 2). Second Reading of the Monetary Authority of Singapore Bill (Vol. 30, col. 212). Singapore: Government Printers. Call no.: RSING 328.5957 SIN; Republic of Singapore. Government Gazette. Subsidiary Legislation Supplement. (2002, September 27). Currency (Amendment) Act (Commencement) Notification 2002 (S 507/2002, p. 3804). Singapore: Government Printers. Call no.: RSING 348.5957 SGGSLS; Currency board's merger with MAS takes effect today. (2002, October 1). The Straits Times, p. 19. Retrieved from NewspaperSG.
4. Monetary Authority of Singapore, 1972, pp. 23–24.
5. Ministry of Culture. (1969, September 20). Speech by Dr Goh Keng Swee, Minister for Finance, at the 13th anniversary dinner of the Economic Society of Singapore held at the Dragon Room, Robinson Restaurant, Singapore, on Saturday, 20th September 1969 [Press statement]. Retrieved December 16, 2013, from National Archives of Singapore website: http://archivesonline.nas.sg/
6. Ministry of Culture, 20 Sep 1969, Speech by Dr Goh Keng Swee, Minister for Finance, at the 13th anniversary dinner of the Economic Society of Singapore held at the Dragon Room, Robinson Restaurant, Singapore, on Saturday, 20th September 1969 [Press statement].
7. Singapore. Parliament. Parliamentary Debates: Official Report. (1970, July 22). First Reading of the Monetary Authority of Singapore Bill (Vol. 30, col. 133). Singapore: Government Printers. Call no.: RSING 328.5957 SIN.
8. Parliamentary Debates: Official Report, 2 Sep 1970, Second Reading, Vol. 30, col. 212–216.
9. Parliamentary Debates: Official Report, 2 Sep 1970, Second Reading, Vol. 30, col. 213.
10. Parliamentary Debates: Official Report, 2 Sep 1970, Second Reading, Vol. 30, col. 213.
11. Parliamentary Debates: Official Report, 2 Sep 1970, Second Reading, Vol. 30, col. 216.
12. Government Gazette. Subsidiary Legislation Supplement, 24 Dec 1970, Sp.S341/1970, pp. 1301–1302.
13. Republic of Singapore. Government Gazette. (1970, December 24). (G.N. 3982, p. 5044–5045).Singapore: Government Printing Office. Call no.: RSING 959.57 SGG.

 

The information in this article is valid as at 2014 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history of the subject. Please contact the Library for further reading materials on the topic.

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