Press Releases

The Government has decided to merge the Board of Commissioners of Currency, Singapore (BCCS) with the Monetary Authority of Singapore (MAS) by 31 March 2003.

2. This is an organisational change to streamline our institutional structure. There will be no change in the way the currency issue is managed. The Currency Act will be retained, and currency-in-circulation will continue to be fully backed by gold and foreign assets at all times.

Background

3. BCCS was set up in 1967 to implement the currency board system, which Singapore then practised. Under this system:

- the exchange rate was fixed between the domestic and a specified foreign currency;

- domestic notes and coins were fully convertible at this fixed exchange rate; and

- the domestic currency was fully backed by foreign assets or gold.

4. However Singapore has progressively evolved away from this system of a fixed exchange rate. Although we have kept BCCS as a statutory board by itself, separate from MAS, de facto Singapore no longer operates a currency board arrangement.

5. The Singapore dollar was floated in 1973. In 1982, convertibility of domestic currency notes and coins into gold and other foreign currencies on demand was repealed. Today, the exchange rate of the Singapore dollar is managed by MAS, against a basket of currencies of our main trading partners, with the objective of keeping inflation low and maintaining the purchasing power of the Singapore dollar.

6. One feature of the currency board system that we have retained is the full backing of the currency-in-circulation by gold and foreign assets. This is required under the Currency Act, and has contributed to confidence in the currency. This will not change even after the merger of MAS and BCCS.

7. However, the broader basis of confidence in the Singapore dollar exchange rate is the consistency and soundness of our monetary and fiscal policies, as well as our foreign reserves which have grown over the years. In this context, the merger of MAS and BCCS will enable us to rationalise common functions and realise efficiency gains, without compromising the overriding objective of managing the currency and maintaining confidence in the Singapore dollar.

8. The merger is subject to the approval of Parliament. The Ministry of Finance, MAS and BCCS are working out the details.

Ministry of Finance