STATE BANK

Mr David Marshall asked the Minister for Finance whether the Government would consider establishing a State Bank.

Dr Goh Keng Swee: Would the hon. Member please inform the House what sort of State bank he wishes the Government to consider establishing?

Mr David Marshall: Any bank, Sir, such as every other State in the world has. I am rather surprised that he should need a clarification.

Dr Goh Keng Swee: Sir, different States have different types of State banks. Some State banks are for special purposes, such as to provide credit to farmers and they are called Farmers' Banks. Again some other types of State banks provide easy credit facilities for industrial banks, and they are called State industrial banks. There are Co-operative State banks and a whole range of types of State banks. I am not trying to be facetious, Mr Speaker, Sir, when I ask the hon. Member for a clarification on this point because there are different types of State banks.

However, the Member says that every State has got a State bank. I presume he means a Central Bank. Am I right in this understanding?

Mr David Marshall: The question is a simple one, Sir. Is the Government considering the creation of any State bank?

Dr Goh Keng Swee: The Government already has a State bank and that is the Post Office Savings Bank.

Mr David Marshall: Taking it seriously, Sir, is the Minister then indicating to the House that the Government has no intention to establish any Central or other State bank?

Dr Goh Keng Swee: Now we come to it, Mr Speaker, Sir. As I said, he was really referring to a Central Bank. The answer is "no". The reason is quite simple. I do not know whether I should go into any details on the functions and purposes of a Central Bank and their role in the financial system of a country. Perhaps I should not. I can give the reasons quite simply. The Federation of Malaya has a Central Bank and, after merger, I have no doubt this Central Bank will establish branches in Singapore and the Borneo territories. It is, therefore, quite unnecessary for the Singapore Government to consider setting up a Central Bank of its own.

A Central Bank such as most independent nations have is only worthy of its name and status if it is, in addition to performing the necessary functions of government bankers and the lender of last resort to commercial banks, also the authority to control the monetary issue of the country, that is, the note issue of the country, and as a corollary it acts as a custodian of the nation's foreign exchange reserve. We do not have a currency of our own, and therefore to have a Central Bank of our own, while we are part of the common currency area together with the Borneo territories and the Federation of Malaya, is quite a meaningless affair.

Mr David Marshall: Mr Speaker, Sir, I would ask the Minister, accepting his thesis that a Central Bank is not necessary in the light of the merger proposals, would he not consider that in the context of the stature of Singapore in the commercial and financial field, a State Commercial Bank is imperative for our own commercial needs?

Dr Goh Keng Swee: Sir, my own appraisal is that our banking requirements are adequately met by the private commercial banks. But if the Member for Anson thinks otherwise and if he could convince me that there is a gap in the range of services which the private banks are performing and which a further State Commercial Bank would perform, then I shall be very happy to consider his proposal.