CURRENCY (AMENDMENT) BILL

Order for Second Reading read.

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Amendments are proposed to the Currency Act to allow for the establishment of a Currency Reserve Fund. This Reserve Fund will act as a buffer against fluctuations in the external backing of the Singapore Dollar arising from volatility in exchange rate movements. Amendments to the Act are also proposed to improve the practices and procedures of the Board of Commissioners of Currency, Singapore.

At present, the Board maintains two accounts. The first account, the Currency Fund, holds the external assets backing the local currency. By law, the Singapore Dollar is required to be backed at least 100% by external assets at all times. Income from these assets, together with the other operating income of the Board, is credited to another account called the Currency Fund Income Account.

Fluctuations in foreign exchange rates will affect the Singapore Dollar denominated value of the external assets backing the local currency. Should the face value of the currency-in-circulation exceed the value of the Currency Fund, the difference must be met from the Income Account. If the Income Account is insufficient for the purpose, the shortfall will be met from the Consolidated Fund. In the reverse situation where the value of the Currency Fund exceeds that of the currency-in-circulation, the Board may transfer the excess to the Income Account.

At present, the Board has to transfer all surpluses in the Income Account to the Consolidated Fund on an annual basis. It is proposed that the transfer no longer be made mandatory. The Board can then set aside a portion of its surpluses every year in a Currency Reserve Fund, and use these to maintain the Currency Fund at a stable level. The Reserve Fund will enable this to be done without the administrative inconvenience of having to make transfers to and from the Consolidated Fund. To ensure that the Reserve Fund will not accumulate surpluses in excess of what is needed to maintain a stable currency backing, the Minister for Finance will monitor the size of the Reserve Fund. Amounts not required for the Reserve Fund will continue to be transferred to the Consolidated Fund annually. Clauses 12 and 13 of the Bill will legislate these changes.

The other proposed amendments to the Currency Act are to improve the procedures and practices of the Board. These revised changes would include:

(a) allowing the Board to provide such other services as it considers necessary besides the issuing of currencies. Clause 2 of the Bill will enable the Board to do this;

(b) allowing the Board to appoint consultants and agents through clause 4 of the Bill;

(c) clarifying that banknotes that are illegally dealt with shall not be legal tender, and providing a better definition of the phrase "illegally dealt with" in relation to notes and coins. These will be given effect by clause 6 of the Bill;

(d) enabling the Board to repossess currency notes and coins that have been illegally dealt with. Clause 9 of the Bill provides for this; and

(e) allowing the Board to seize counterfeit notes and coins. Clause 14 of the Bill is for this purpose.

Sir, I beg to move.

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. - [Dr Richard Hu Tsu Tau].

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