As a rule, offshore banking Singapore is operated by the Asian Currency Units. According to Article 77 paragraph 5 of the Banking Act, they represent operational units whose function is to conduct business in the Asia Dollar Market. According to Article 77 paragraph 1 of the Banking Act, the offshore banking units must be licensed by the central bank of Singapore which is called the Monetary Authority of Singapore.
Actually Asian Currency Units may also be operated by onshore commercial banks and merchant banks. In these cases, Asian Currency Units are distinct accounting entities but they are not distinct legal entities separately licensed by the Monetary Authority of Singapore.
Nearly all commercial banks and merchant banks in Singapore operate Asian Currency Units.
If talking about the offshore banking services delivered by the Asian Currency Units then it has to be mentioned that they accept deposits and make loans in foreign currencies and are not allowed to do business in Singapore dollars.
As any offshore banking centers in Singapore, there are also convenient fiscal regimes and regulatory frameworks that apply to offshore banking Singapore activities. Transactions conducted under the auspices of the Asian Currency Units qualify for tax incentives. Also, the Asian Currency Units are exempted from several prudential legal requirements. Most importantly the rule regarding the reserve requirements, the minimum liquid asset ratio, limitation in investments, limitation on acquisition of immovable property and some of the limitations on credit facilities are some of the legal rules that are applied in a flexible way to offshore banking. It is also important to mention that there is no withhold or income tax on nonresident Asian Currency Units’ depositors. The Asian Currency Units are taxed at a concessionary rate of 10 percent. The normal corporate tax rate in Singapore is 26 percent.
Except the fact that the Monetary Authority of Singapore grants the license for the offshore banking units, the Asian Currency Units have the legal obligation to present monthly detailed financial statements to the central bank. It is the Monetary Authority of Singapore which supervises offshore banking units’ activities.
The domestic legislation does not impose a formal insurance scheme for offshore banking units. The central bank has the power to act as the lender-of-last resort, but there is no such obligation.
In 1996 following an Amendment of the Banking Act, the foreign regulators were allowed to inspect the Singapore banks under their oversight.