The origins of the Asia dollar market 1968–1986: regulatory competition and complementarity in Singapore and Hong Kong

Offshore financial centres have attracted considerable critical attention over the past few decades as havens for lightly taxed funds that circulate outside the regulatory oversight of major financial centres. This article addresses the emergence of an offshore market in US dollars in Singapore from the late 1960s using a range of archival sources to identify the motivations of the host, participant banks and regional rivals. The development of the Asia dollar market is particularly striking because Singapore was not the most likely venue for an Asian offshore financial centre. The main regional financial centre was Hong Kong, but the Hong Kong authorities made a deliberate choice not to host an offshore market in Hong Kong, a decision that was initially supported both by the state and by incumbent banks, although the banks later changed their view as the Singapore market grew. This case thus opens up discussion of the influence market actors exert over regulators when they are engaged in regulatory arbitrage as well as regulatory competition between states. Evidence is also presented about the efforts of the Bank for International Settlements to encourage greater transparency in offshore financial centres in the 1980s.