Tonga - Banking and securities

The Bank of Tonga was formed in 1971, with the government holding 40% of the shares and 20% each held by the Bank of Hawaii, the Bank of New Zealand, and the Bank of New South Wales. The overseas banks provided staff and supervision for the Bank of Tonga, which offers all commercial services and has assumed responsibility for government savings, traders' current accounts, and foreign exchange dealings. The Tongan Development Bank (TDB) was founded in 1977.

Tonga's fiscal policy has traditionally been cautious, with taxation and expenditure measures balancing in the recurrent budget and the development budged being financed mainly through grants and soft loans. Legislation to set up a central bank was passed in late 1988 and the National Reserve Bank came into existence the following year. The Ministry of Finance, the Board of Currency Commissioners, the Board of Coinage Commissioners, and the island's only commercial bank, the Bank of Tonga, had until then jointly performed central bank functions. A second commercial bank, MBF Bank, was launched in late 1993.

Legislation has been passed to enable Tonga to become an international banking center. The legislation permits up to four foreign banks to establish operations in the capital. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $20.6 million. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $67.0 million.

Tonga has no stock issues or securities trading.