Monetary Authority of Singapore (MAS), which is de-facto central bank of Singapore was founded in 1971 pursuing the principles of Monetary Authority of Singapore Act. Since monetary and banking supervisory functions of the central bank are not separated in Singapore MAS is responsible for both monetary policy and supervision of offshore banking as well as domestic banking sector. In addition, Monetary Authority of Singapore also undertakes the supervision of finance corporations, insurance companies and stock exchanges.
Monetary Authority of Singapore also acts as a lender of last resort meaning that it provides credit to the illiquid banks if they are unable to raise funds from other sources. The objectives of Singapore financial supervision are different from those of supervisory authorities of other countries in the region. In Monetary Authority of Singapore thrives to ensure stability and good-standing of the financial sector and also protect right and interests of investors and depositors. An ultimate aim of MAS is reduce risks, bank failures and financial scandals that would threaten the good image of Singapore as a low tax regional offshore banking center.
The legislation on financial regulation including offshore banking is concentrated in the following acts: 
Banking Act, Finance Companies Act, Insurance Act, Securities Industry and Futures Act, Development Loan Act and Local Treasury Bill Act. These acts define MAS as the financial supervisory entity and also set basic rules and guidelines for effective offshore banking supervision.
Conducting monetary/exchange rate policy is one of the main goals of Monetary Authority of Singapore. Singapore dollar is pegged towards currency basket that is composed of the currencies of Singapore’s main trading partners. Currency basket is not fixed. It is subject to continuous changes based on Singapore’s trading portfolio.
Singapore sustains managed float regime that authorities consider as a first-best possible arrangement to maintain Singapore as a competitive offshore banking center. Effective exchange rate is periodically checked by evaluating economic indicators and determining whether exchange rate is in conflict with the market fundamentals or not.
Singapore authorities adopted methods that allow economy to tackle external economic shocks. During recession of 1980s government adopted new wage plan that is based on variable bonus system. Since modifying bonuses are easier than wages, when amending exchange rate is required the government makes that either through amending bonus rates or contribution rates to Central Provident Fund (Pension Fund).
Monetary Authority of Singapore considers exchange rate policy as the most effective instrument to affect inflation. MAS regards interest rate to have low effectiveness in affecting real economy. In addition wide trade relations, balanced fiscal policy and long record of low inflation. There is no need to fix Singapore dollar to US dollar or Euro, since inflation has been traditionally lower in Singapore than in these countries/zones. In addition under fixed exchange rate regime economy has difficulty to reply to external shocks and it does not align with the change in market fundamentals.
