CURRENCY BILL

Order for Second Reading read.

4.37 p.m.

The Minister for Finance (Mr Lim Kim San): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Mr Speaker, Sir, for many years, the sole currency issuing authority in the territories now comprising Malaysia, Brunei and Singapore was the Board of Commissioners of Currency, Malaya and British Borneo. This has resulted from an Agreement made between the Governments of these territories, which Agreement also provides that the Board should cease to be the currency issuing authority should anyone of the Participating Governments give notice to that effect. In December 1964, the Government of the Federation of Malaysia lodged such a notice and as a result the Board will cease to issue currency in June this year. After separation, Singapore embarked on negotiations with the Malaysian Government regarding the use of a common currency in these two territories. The House will recall that at a sitting on the 26th August, I gave details of the negotiations and outlined events leading to the announcement made on 17th August that an agreement for a common currency and banking system could not be reached between the Singapore and Malaysian Governments. There has been much debate and discussion on this subject since then, and I do not propose to dwell on this any further. Suffice it to say that with the breakdown in negotiations, it now becomes necessary for us to take legal steps to enable Singapore to issue her own currency on 12th June, 1967. The objective of this Bill is, therefore, to set up a currency issuing authority for Singapore.

On 26th August, 1966, I told the House that Singapore would continue with a Currency Board system. I further said that the new Singapore dollar will "at all times be backed 100 per cent by gold or foreign exchange assets and will remain fully convertible". The provisions of the Currency Bill now before the House fulfil both these requirements.

I would now like to take the provisions of the Bill clause by clause and to draw the attention of Members of the House to the more salient features of the Bill.

Clause 3 provides for the establishment of a Currency Board to be called "the Board of Commissioners of Currency, Singapore". The purpose of the Board is to issue currency notes and coins. In clause 4, the Board is made a body corporate, with its head office in Singapore, and with power to appoint agents and correspondents. Clause 5 enables the Board to employ officers for its business.

The composition of the Board is given in clause 6, which provides for a Board of six members comprising the Chairman, who shall be the Minister responsible for Finance, and five other members, including a Deputy Chairman, to be appointed by the President. The Deputy Chairman will be a full-time official and will become the chief executive officer of the Board. The other four members will include representatives of local and foreign banks in Singapore, so that what we do in the Board will be known not only in Singapore but abroad as well.

The Board is obliged by law to meet at least once a year, and on receipt of a request from at least two members of the Board, the Chairman is obliged to call a meeting as soon as practicable. The quorum for a meeting is three members. It will be noted that the Chairman and the Deputy Chairman have two votes each, whilst the other four members each has one vote. In an equality of votes, the Chairman would have the casting vote. It will no doubt be argued that this system of votes places the balance of par in the hands of the official members. It is our belief, however, that the structure of the Board allowing for appointment of four members from the private sector will provide for the maximum expression and balance of interests before decisions could be taken. However, when and where there is a genuine difference of opinion or of judgment among members of the Board, it is necessary for the Government, in the wider interests of the nation, to be able to make the ultimate decision with the use of the Chairman's casting vote. Thus, it is provided that the Government members, i.e., the Chairman and Deputy Chairman, will together have four votes and the other four members will together have the same number of votes with the Chairman having a casting vote in case of an equality of votes.

In clause 8 are listed the conditions under which members of the Board are automatically disqualified. In clause 9 are outlined obligations of Board members in deliberations of the Board where the member has an interest. Clause 10 ensures that members and employees of the Board do not make use of information they acquire in the course of their functions for their own private use or for purposes other than for the performance of their duties under this Act.

Clause 11 establishes the unit of currency for Singapore which will be called the Singapore dollar and which will be divided into 100 cents. In clause 12 is stated the par value of the Singapore dollar which will be 0.290299 grammes of fine gold. This is equivalent to 2s. 4d, in sterling. It will be seen, therefore, that the par value of the Singapore dollar will be the same as the par value of our present dollar. In clause 13, it is provided that on and after 12th June, unless validly provided for, all monetary obligations or transactions in Singapore shall be deemed to be expressed and recorded and settled in the Singapore dollar. This is to avoid confusion. Clause 14 gives the Board the sole right to issue currency notes and coins in Singapore. The legal tender status of these notes and coins is any amount for notes; and for coins, up to an amount not exceeding $10 in the case of coins of denominations of 50 cents and above; and up to an amount not exceeding $2 in the case of coins of a lower denomination. These provisions arc similar to those in the present Currency Board system. Sub-clauses (3) and (4) of this clause are transitional provisions, providing that the notes and coins of the present Currency Board shall continue to be legal tender in Singapore in the amounts as mentioned above until demonetised. Such demonetisation will require the approval of the President and has to be published in the Gazette.

Clause 16 of the Bill ensures that the new Singapore currency notes and coins are fully and automatically convertible into sterling. This is identical with the provisions to be found in the present Currency Board system. Clause 17 provides that the Board may at its discretion redeem and issue currency notes and coins against gold and other foreign currencies. In clause 18 are spelt out the details of how procedures of redemption and issues of currency notes and coins are to be effected by the Board.

In clauses 23, 24 and 25 are detailed the backing and types of assets that will be held by the Board as a backing for the currency it has issued. Clause 23 sets up a Fund to be called the Currency Fund. The assets of the Fund form the backing for the currency issued by the Board. The provisions of clause 25 (3) ensure that the value of the Fund is equivalent to the face value of the currency issued by the Board, i.e., there is 100 per cent cover for every Singapore dollar issued. Further, it is provided that the Fund shall consist of all external assets, the items of which are listed in clause 24. It will be seen that, apart from sterling, the Board is also empowered to hold other foreign assets and therefore have a more diversified portfolio of investments. This is an improvement compared with the present position where only sterling assets are held. It should also be noted that there are no provisions whatsoever for a fiduciary issue. Put simply, Mr Speaker, Sir, a fiduciary issue means the issue of currency with Singapore Government securities as backing and represents Government's borrowing from the Currency Fund. This, I may remind the House, is an even stricter provision than has been found in our present currency system which allows the present Board to have a fiduciary issue of $300 million. In addition, the provisions of clause 25 (3) and clause 26 guarantee the 100 per cent cover as any deficiency in the assets of the Currency Fund is automatically charged to the Consolidated Fund. Thus it will be seen that the Singapore dollar is at all times backed 100 per cent by foreign assets.

In clauses 28 to 31 are miscellaneous provisions. Clause 28 provides for the financial year of the Board, which will be the calendar year. Clause 29 provides that the accounts of the Board shall be audited by the Director of Audit. Clause 30 requires the annual accounts and report of the Board to be transmitted to the President and thereafter published in the Gazette and laid before Parliament. The Board is also required to make Out quarterly returns of its currency notes and coins in circulation for publication in the Gazette and to publish half-yearly statements showing the liquid portion of its Fund and the assets of the Fund. Thus every member of the public will be in a position to know and verify for himself the value and worth of the Singapore dollar.

In clauses 32 to 35 are transitional and repeal provisions. Clause 32 gives legal status to acts performed by the Government on behalf of the Board prior to its establishment. In clause 34, it is provided that the notes and coins of the present Currency Board shall be exchanged at par for the new Board's notes and coins.

I would like, Mr Speaker, Sir, to add in conclusion that the Bill now before the House has been drafted in consultation with the Association of Banks in Singapore and Malaysia. This Association was formed when Singapore was in Malaysia, and still represents banks in Singapore. Many of the Association's suggestions have been accepted and incorporated in the Bill. It now remains for me to record the Government's appreciation of the careful and detailed manner in which the Association has contributed in finalising the Bill, which continues with a system, albeit old-fashioned to some, but which has given us one of the strongest and most stable currencies you can find anywhere. Mr Speaker, Sir, we are loath now to relinquish a method of currency issue which has stood us in good stead for so long. But if and when we find it imperative to make changes and amendments to the law in order to cope with the growing complexities and sophistication of the monetary system, we will not hesitate to do so. However, for the immediate future we believe confidence in the value of the Singapore dollar can and will be retained by a continuation of the Currency Board system with 100 per cent backing and without any fiduciary issue.

Sir, I beg to move.

Question proposed.

Mr Speaker: Perhaps this is a convenient time to suspend. I will suspend the sitting and resume at

5.30 p.m.

Sitting accordingly suspended at 4.56 p.m, until 5.30 p.m. Sitting resumed at 5.30 p.m.

[Mr Speaker in the Chair]

Debate resumed.

Mr Speaker: At the suspension I proposed the Question, "That the Bill be now read a Second time." In the absence of a debate, I will now put the Question.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. -[Mr Lim Kim San].

Bill considered in Committee; reported without amendment; read a Third time and passed.