Can reserves be transferred easily among our investment entities to buffer their losses?

No. An occasional misperception is that the Government made the Constitutional amendments in 2002 and 2004 to allow for the transfer of Past Reserves between Fifth Schedule entities and the Government so as to be able to conceal investment losses. This is wrong.

We have explained that a transfer of funds cannot be used to hide investment losses (see question on "Has the Government transferred funds to Temasek or GIC to show better performance? ").

The amendments in 2002 and 2004 were made to enable the transfer of Past Reserves within the Reserves protection framework (i.e. among the Government and Fifth Schedule entities), without any loss of protection to Past Reserves. Past Reserves cannot be transferred outside of the Reserves protection framework without the approval of the President. The amendments in 2002 and 2004 did not alter this position.

Past Reserves may need to be transferred to facilitate the restructuring of Fifth Schedule entities to better deliver public services. For example, the merger of the then-Board of Commissioners of Currency, Singapore (BCCS) with Monetary Authority of Singapore (MAS) in 2002 required the transfer of BCCS Past Reserves to MAS.

In transferring the Past Reserves from BCCS to MAS, there was no loss in the amount of Past Reserves protected. This was because the Board of Directors of MAS had resolved that the Past Reserves transferred from BCCS would be added to the Past Reserves of MAS and protected.

The Constitutional amendments make clear that there is no draw on Past Reserves as long as (i) Past Reserves are being transferred among entities that are within the Reserves protection framework; and (ii) the receiving entity undertakes to protect the Past Reserves that are transferred over. In such circumstances, the overall amount of Past Reserves being protected is unchanged, and hence the Presidents approval need not be obtained for such transfers.