Brief History on the Central Bank

Samoa did not always have a Central Bank. Before independence in 1962, Samoa used the currency (British pounds, shilling and pense) issued by the Bank of New Zealand, which was owned by the New Zealand Government.

After independence, the currency was initially issued by the Bank of Western Samoa. Like the Bank of New Zealand, this was a commercial bank, but it was partially owned by the Samoan Government, and carried out currency operations and foreign exchange policy on behalf of the Government.

In the early 1970's, the Government decided that it needed to take more formal control of the currency issue. However, at that time the Government saw little need for a central bank, believing that the other duties we now take for granted could be handled in other ways. So the issue of the new currency was put under the control of the new organization, the Monetary Board of Western Samoa. This was established by the Monetary Board of Western Samoa Act of 1974, and came into being in early 1975.

The Act of Parliament that set up the Monetary Board gave it four objectives:

(a) to control and regulate the supply of money in the country;
  
(b) to promote and foster internal and external monetary stability in Western Samoa;
  
(c) to promote sound banking and financial structure; and
  
(d) to promote and foster credit and exchange conditions that are conductive to orderly and
  balanced economic growth.

As Samoa developed, ideas also developed and changed. The Government felt that it was time to begin issuing currency directly. This needed an organization with a proper balance sheet, to reflect not only the currency liability, but also the assets that backed the currency issued. This balance sheet could also then be used to hold the reserves of the commercial banks.

Also in the late 1970s early 80s, the Samoa economy was in a critical financial state. The inflation rate was close to 30 percent, interest rates were very high, foreign exchange reserves were almost depleted and the Government budgets were producing large deficits. There was a need for a separate and more independent institution to administer monetary policy functions.

So in 1984, the Government passed the Central Bank of Samoa Act to establish the Central Bank to undertake these functions and to take over the role of advising on, and implementing, monetary policy.

Later, the Financial Institutions Act 1996 added the licensing and supervision of financial institutions to the Central Bank's responsibilities. The Money Laundering Act 2000 has made the Central Bank the Money Laundering Prevention Authority for Samoa and the Insurance Act 2007 authorizes the licensing and supervision of insurance entities.