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INTRODUCTION

Asian Clearing Union (ACU) is the simplest form of payment arrangements whereby the members settle payments for intra-regional transactions among the participating central banks on a multilateral basis. The main objectives of a clearing union are to facilitate payments among member countries for eligible transactions, thereby economizing on the use of foreign exchange reserves and transfer costs, as well as promoting trade among the participating countries. The Asian Clearing Union is a clearing union among other clearing houses/payments arrangements operating in various regions of the world.

ESTABLISHMENT AND FUNCTIONS

The Asian Clearing Union was established at the initiative of the United Nations Economic and Social Commission for Asia and the Pacific ( ESCAP ) . The decision to establish the ACU was taken at the Fourth Ministerial Conference on Asian Economic Cooperation held in December 1970 at Kabul. The Draft Agreement Establishing the ACU , was finalized at a meeting of senior officials of the governments and central banks held at ESCAP, Bangkok, in December 1974 after five central banks (India, Iran, Nepal, Pakistan and Sri Lanka) signed the Agreement. Bangladesh and Myanmar were the sixth and seventh signatories to this Agreement. Bhutan signed the Agreement in 1999 and the number of members of the Asian Clearing Union reached eight.

OBJECTIVES

1. To provide a facility to settle on a multilateral basis, payments for current international transactions among the territories of participants;
2. To promote the use of participants’ currencies in current transactions between their respective territories and thereby effect economies in the use of the participant's exchange reserves;
3. To promote monetary co-operation among the participants and closer relations among the banking systems in their territories and thereby contribute to the expansion of trade and economic activity among the countries of the ESCAP region; and
4. To provide for currency SWAP arrangement among the participants so as to make Asian Monetary Unit available to them temporarily.

UNIT OF ACCOUNT

1. The accounts of the Asian Clearing Union is held in a common unit of account designated as The Asian Monetary Unit (AMU).
2. The value of one Asian Monetary Unit ( with effect from 1.1.1996 ) is equivalent in value to one US Dollar.

SETTLEMENT PERIOD

Settlement of net position and accrued interest takes place at the end of each two monthly settlement period. The Board of Directors may change the length of the settlement periods by a decision taken by unanimous vote of all of the Directors.

INTEREST

Interest shall be paid by the net debtors and transferred to net creditors on daily balances outstanding between settlement dates. The rate of interest applicable for a settlement period will be the closing rate on the first working day of the last week of the previous calendar month offered by the Bank for International Settlements (BIS) for one month Euro-dollar deposits.

Relations with other organizations and payment arrangements.

There is no prohibition for the participants to cooperate with other, regional or sub-regional international organizations or other payment arrangements among countries within or outside The ESCAP region.

COMPOSITION

At present the ACU enjoys the membership of the following eight participants:

• Bangladesh Bank
• Royal Monetary Authority of Bhutan
• Reserve Bank of India
• Central Bank of the Islamic Republic of Iran
• Central Bank of Myanmar
• Nepal Rastra Bank
• State Bank of Pakistan
• Central Bank of Sri Lanka

MEMBERSHIP

Membership in the ACU is open to the central bank, treasury or the monetary authority of each regional member and associate member of the ESCAP located in the geographical area defined in ESCAP's terms of reference. A central bank or monetary authority that is eligible to participate may apply to the Board of Directors to become a participant and be admitted as a participant if the Board so decides by a two-third vote of all the Directors and upon such central bank or monetary authority signing this Agreement and accepting the rules, regulations and decisions of the Board of Directors. The Chairman of the Board shall determine the date on which the payments and transfers with respect to such a participant shall be included in the clearing facility.

NO DEFAULT

Under the ACU procedure rules the debtor members should pay up their dues in convertible currencies within four working days of the receipt of the notice of payment from the Secretary General. The experience of the ACU's operations from the inception to date proves that this requirement has been solemnly fulfilled by each participant on each and every occasion. There has been no default by any member so far in meeting its obligation for the settlement of its net position within the stipulated time. In comparison to the other clearing arrangements among the developing countries, the achievement of "zero default" is a landmark of the success of the ACU.

ACU SWAP FACILITY

The main objective of the SWAP arrangement is to extend short term foreign exchange support by providing participants access to the international reserves of other participants in times of temporary liquidity problems.

The potential benefits of the SWAP facility are:

1. Easy access by participants to international reserves of other participants at a time when foreign exchange support is needed ;
2. Availability of the facility on a multilateral basis rather than on a bilateral basis; and
3. The opportunity for further monetary cooperation among the participant's central banks.

STRUCTURE

Board of Directors: Each participant appoints one Director and one Alternate Director. The Board elects a chairman and a vice-chairman from among its members. The Board meets at least once a year, and decisions are taken by a simple majority vote of all Directors, except as provided for in the Agreement.

Agent: The Board of Directors may make arrangements with a central bank or monetary authority of a participant to provide the necessary services and facilities for the operation of the clearing facility. The Board has accepted the offer of The Central Bank of the Islamic Republic of Iran to act as agent for the Union.

Secretary General: The Board is authorized to appoint a Secretary General for a term of three years.

Language: The official language of the Asian Clearing Union is English.

GENERAL PUBLICATIONS

1. The Annual Report of the ACU is published each year after approval by the Board of Directors.
2. A Monthly Newsletter is published and circulated at the end of each month, outlining the activities and operations of the ACU in the preceding month.

COMMUNICATIONS

For any further information or enquiries, please contact at the following address:

Secretary General
Asian Clearing Union
(Secretariat)