De-dollarizing transactions among ACU members

Governor of the Central Bank of Iran (CBI) held talks with senior banking officials from various Asian countries on the sideline of the 51st Asian Clearing Union (ACU) summit in order to encourage getting new members and de-dollarize the economic transactions among ACU members.

As reported by the CBI portal, Mohammad-Reza Farzin met and held talks with Governor of the Central Bank of Russia Elvira Nabiullina, Governor of the State Bank of Pakistan Jameel Ahmed, Deputy Head of the Monetary Policy and Economic Analysis Directorate of the National Bank of the Republic of Belarus Sergey Kalechits on the sidelines of the summit held in Tehran on May 23-24.

In the meeting with Nabiullina, the two sides emphasized strengthening trade exchanges and using the national currencies of the two countries in bilateral trade.

During the talks with the Belarusian delegation, Farzin said strengthening relations through bilateral and multilateral monetary agreements is a model that can play an important role in the development of trade relations between two countries.

Referring to Belarus’ readiness to join the ACU, the CBI head said, “Belarus's membership with its good capacities in its economy can lead to the development of the activities of this union.”

In the meeting with Farzin, Ahmed, the governor of the State Bank of Pakistan, welcomed the development of the banking relations with Iran by creating a non-SWIFT platform for connecting the bank systems of the two countries and clearing trade under the framework of the Asian Clearing Union and said, “We are ready for the development of banking relations. By introducing representative banks and creating a joint working group, we will provide the grounds for deepening banking relations.”

According to Farzin, accepting new members with the aim of creating synergy and diversifying the currency basket of the union can encourage de-dollarization in trade exchanges among the ACU members. This is one of the major goals of this union in the future, he said.

 

Iran hosts Asian Clearing Union summit

The 51st Asian Clearing Union (ACU) summit, mainly focusing on de-dollarization, kicked off on Tuesday at the Central Bank of Iran (CBI).

On the first day of the two-day event, expert committees from the delegations attending the summit held meetings to discuss preliminary issues.

The summit is attended by the governors of the central banks of the ACU member countries in addition to Russia.

The Governor of the Central Bank of Russia Elvira Nabiullina arrived in Tehran on Monday to attend the event.

In the 51st ACU summit, the members are set to discuss various issues including the amendment of the Union's statutes in order to facilitate the acceptance of new members, and determining the new currency basket of the member countries in order to settle exchanges without the need for euro or the dollar.

Exploring the feasibility of using digital currencies of central banks for cross-border payments and the unveiling of the interbank messaging network of the member states of the Union are also among the major topics on the summit’s agendas.

Asian Clearing Union is a payment arrangement whereby the participants settle payments for intra-regional transactions among the participating central banks on a net multilateral basis.

The main objectives of the 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 and banking relations among the participating countries. 

Currently, the members of ACU are the central banks of Iran, India, Bangladesh, Bhutan, Maldives, Nepal, Pakistan, Sri Lanka, and Myanmar.

The central banking authorities of member countries have issued detailed instructions and modalities for channeling monetary transactions through the ACU. Membership in the ACU is open to central banks located in the geographical area of ESCAP and non-ESCAP.

 

Governor State Bank of Pakistan, new Chairman of Asian Clearing Union (ACU)

Dr. Murtaza Syed, Acting Governor State Bank of Pakistan (SBP) assumed the charge of Chairman of the Board of Directors of the Asian Clearing Union (ACU) in the 50th meeting of the ACU Board held in Islamabad on May 13, 2022 in both physical and virtual modes.

Established in 1974 with permanent headquarters in Iran, the Asian Clearing Union (ACU) is a payment arrangement system whereby member countries settle payments for intra-regional transactions among their central banks on a net multilateral basis. Currently, the Central Banks of Bangladesh, Bhutan, Iran, India, Maldives, Myanmar, Nepal, Pakistan and Sri Lanka are members of the ACU. The main objectives of the 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 and banking relations among the participating countries. 

The Secretary General of ACU, Mrs. Lida Borhan Azad, presented the annual report on the operations of the union for the year 2020, which the Board approved and adopted.

The Board reviewed progress on the ongoing projects being undertaken by the union. It reviewed a new web based messaging system and constituted a sub-committee to finalize the recommendations for its implementation within six months. The Board also considered the report on issues faced by traders under the ACU mechanism and decided to implement the recommendations in the next three months. 

While appreciating the report on the use of domestic currencies for settlement of trade transactions prepared by the Reserve Bank of India (RBI), the Board requested RBI to convene a virtual seminar to enable member countries to gain a fuller understanding of the proposed mechanism. The Governors and head of the delegations of the countries also gave a broad overview of the economic development in their respective economies and shared their experiences in addressing the challenges emerging in the post COVID-19 global landscape.

Governor Central Bank of Myanmar, Than Nyein, Vice Governor Central Bank of Iran, Dr.Mohsen Karimi, Chief Economist Central Bank of Bangladesh Md. Habib ur Rehman, and Executive Director Nepal Rastra Bank Ramu Paudel participated in the meeting physically. Governor Dr. P. Nandalal Weerasinghe, and Deputy Governor of Central Bank of Sri Lanka, T.M.J.Y.P Fernando, Governor Maldives Monetary Authority Ali Hashim, Ms. Yangchen Tshogel Central Bank of Bhutan and Executive Director RBI Radha Shyam Ratho, attended the meeting virtually.

At the conclusion of the Board meeting, Mrs. Lida Borhan Azad relinquished the charge of Secretary General of the ACU after distinguished service of the Union for 15 years. While appreciating the services of Mrs. Lida Borhan, the Board appointed Farhad Morsali as the new Secretary General of the ACU, as recommended by the Central Bank of Iran.

The meeting ended with all member countries emphasizing their commitment to further enhancing their trade and banking relationships. It was decided that central bank digital currencies (CBDCs) would be the special topic on which research would be conducted during Pakistan’s chairmanship of the ACU over the next twelve months.