Royal Monetary Authority of Bhutan

History

The Royal Monetary Authority was established in 1982. The following year, it took on the responsibilities of issuing Bhutanese currency, managing external reserves, and operating foreign exchanges. In 1988, the Authority assumed the role of government banker, holding the bulk of government deposits and providing financing. With the passage of the Financial Institutions Act of 1992, the substantive framework of the Authority was expanded to include licensure, regulation, and inspection of financial institutions in Bhutan. The Constitution of 2008 specifically authorizes the government to manage public finance and the monetary system, affirming previous law. Public finance is backed by the Consolidated Fund, while the monetary system is the purview of the Central Bank.

Authority administration

The Royal Monetary Authority Act of 2010, the latest legislation on the Royal Monetary Authority, streamlined the codification of its functions. The Act of 2010 refines the framework of the Board of Directors and Executive Committee, which comprise the administration of the Authority. It also establishes an Audit Committee for internal auditing confirmed by external audits by the Royal Audit Authority, and for publication of statistics.

The Board of Directors is a rulemaking authority consisting of seven people: a royally appointed Governor, as chair; two Deputy Governors, one of whom serves as Secretary; and four others appointed by the government including one member of the Ministry of Finance. The appointed members hold office for five years, may be reappointed once, and are forbidden to hold political affiliations or substantial interests – including any shares – in financial institutions. The Deputy Governors are appointed by the Board itself. The Board, in addition to its rulemaking authority, is also authorized to establish divisions and delegate functions as it sees fit.

The Executive Committee also has seven members: the Governor; the two Deputy Governors; and four others appointed from the among heads of Authority Divisions by the Governor in consultation with the Deputy Governors. The Governor, as the executive, is responsible to the Board for the implementation of the policy and the management of the Authority. The Act of 2010 further promulgates a code of professional and personal conduct, integrity and secrecy requirements, duties under conflict of interest, and a law of accountability for those employed in the Authority.

The Act of 2010 also codifies the role of the Authority in currency, exchanges, official practices, and defines related penal offenses. The Act of 2010 streamlines regulations on external reserves and foreign exchange. It restates the relationship between the Authority and financial institutions and formally enables the Authority to act as the fiscal agent, adviser, and bank to the government of Bhutan. Under the law, government credit and solvency are substantively and procedurally regulated, restricting government loans and advising the government on its budget to prevent indebtedness.

Financial Inclusion

The Royal Monetary Authority of Bhutan is also active in promoting financial inclusion policy and a member of the Alliance for Financial Inclusion.