Financial stability has however been a paramount objective from the time we established the ADM. Banks have been required to segregate their domestic and offshore operations into domestic banking units (DBU) and Asian Currency Units (ACU), as separate accounting entities. •  The DBU of a bank holds its domestically-focused operations, which are predominantly denominated in Singapore dollars. •  The ACU of a bank holds its offshore operations, which are (entirely) denominated in foreign currency. 15. This framework has in the initial decades provided a way to safeguard domestic financial stability, without unduly impinging on the regional activities of banks in Singapore. For example, MAS imposed liquidity requirements on banks’ Singapore dollar liabilities (i.e. only within the DBU). In addition, DBU activities were subject to large exposure and equity investment limits. 16. The Asian Dollar Market was hence regulated along broadly similar lines as the Eurodollar market in London. Foreign banks had to meet high standards before they were admitted to Singapore, but once in, their offshore operations were regulated in the same way as in other reputable financial centres. Much weight was placed on the foreign banks having reputable home regulators exercising oversight of their global operations. However, MAS imposed an additional overlay of prudential requirements on the banks’ domestic businesses in Singapore. 17. The DBU-ACU divide also provided a simple basis for offering developmental incentives to encourage the growth of offshore banking activities out of Singapore. The incentives were in the past focused on the ACU. 18.
In its conduct of monetary policy, Norges Bank places emphasis on satisfying the fundamental preconditions for exchange rate stability against the euro: instruments must be oriented with a view to reducing price and cost inflation to the level aimed at by the European Central Bank (ECB). At the BIS Review 105/2000  8  same time, monetary policy must not in itself contribute to deflationary recessions, as this could undermine confidence in the krone. According to the Maastricht Treaty, the main objective of the ECB is the maintenance of price stability. The ECB has defined price stability as inflation of less than 2%. Inflation in Norway cannot remain higher than inflation in the euro area year after year without this having consequences for the exchange rate of the Norwegian krone against the euro. If price and cost inflation remains higher than the rate of increase aimed at by the ECB over a long period, our experience indicates that the krone will depreciate against the euro sooner or later. Norges Bank must therefore counter such a development. There are institutional differences between the Norwegian monetary policy regime and monetary policy in countries with an inflation target. Norges Bank will inform the government authorities (via the Ministry of Finance) if measures other than those available to the central bank are required in the event that the krone exchange rate cannot be returned to its initial range without creating inflation or a deflationary recession.