1. These rules have been adopted by the Board of Directors of the Asian Clearing Union in terms of Article VIII Section 2 (f) of the Agreement Establishing the Asian Clearing Union and shall be called the Asian Clearing Union Procedure Rules.
2. These rules shall come into force on such date as may be notified by the Board of Directors of the Asian Clearing Union.
3. DEFINITIONS: In these rules, unless there is anything repugnant in the subject or context:
(a) "Agent" means the participant central bank or monetary authority with whom the Board has arranged to provide the necessary services and facilities for the operation of the clearing facility;
(b) "Agreement" means the Agreement Establishing the Asian Clearing Union;
(c) "Asian Monetary Units" (AMUs) mean the units of accounts of the Clearing Union referred to in Article IV of the Agreement;
(d) "Board" means the Board of Directors of the Asian Clearing Union referred to in Article VIII Section 1 of the Agreement;
(e) "Clearing Union" means the Asian Clearing Union;
(f) "Secretary General" includes the officer who is designated by the Agent to perform the functions of the Secretary General for the time being;
(g) "Participant" means any central bank or monetary authority which is a signatory to the Agreement; and
(h) "Currency Swap" arrangement means an arrangement among the participants under which a participant becomes eligible to draw Asian Monetary Units from other participants in specified proportion and in specified circumstances for settling imbalances in clearing.
4. INELIGIBLE PAYMENTS: The following payments shall not be eligible to be made through the clearing facility:
(a) Payments between Nepal and India,except the payments related to bi-monthly settlements;
(b) Payments not related to import and export of goods and services, except to the extent mutually agreed between two or more participants.
Participants have agreed that payments arising on account of import/export transactions on deferred payment terms will not be considered as ineligible payments.
5. ELIGIBLE INSTRUMENTS OF PAYMENT AND THE CURRENCY IN WHICH THEY ARE TO BE DENOMINATED: All instruments of payment denominated in AMUs (ACU dollar, ACU euro and ACU yen and such other currencies including member countries domestic currencies as decided by the Board from time to time), may be used to effect payment through the clearing facility. Settlement of such instruments will be made by the commercial banks through operations of the accounts referred to in Rule 6.
6. CLEARING OPERATIONS:
(a) The participants will permit the banks in their respective countries to maintain ACU dollar, ACU euro and ACU yen accounts with their correspondent banks in the other participating countries. All payments other than ineligible payments will be settled by the banks concerned through these accounts. The operations on these accounts shall be governed by the prevailing Exchange Control Regulations and such other directions, rules, regulations or guidelines as the participants may issue or specify from time to time.
(b) When a commercial bank desires to fund its ACU dollar or ACU euro or ACU yen and such other currencies including member countries domestic currencies as decided by the Board from time to time account with its correspondent bank in another participating country, it may purchase the required amount of ACU dollar or ACU euro or ACU yen and such other currencies including member countries domestic currencies as decided by the Board from time to time either from a local commercial bank having a surplus in that participating country or from its central bank. In the latter case, it will surrender equivalent amount of US Dollars or Euros or Japanese Yens or, at the option of the Central Bank, the equivalent in the local currency to its own Central Bank for remittance through the ACU mechanism. The participant receiving the amount will advise the participant in the country concerned to make available the amount in US Dollars or Euros or Japanese Yens to the concerned bank in that country. After making the payment, the second participant will advise the Secretary General of the ACU to credit its account by debit to the first participant's account.
(c) Member countries will be provided options if they allow their commercial banks to use their normal Nostro (by tagging ACU transactions) or allow selected few banks for routing ACU transactions or continue with their existing practice of maintaining ACU Nostro by all commercial banks.
(d) When a commercial bank desires to repatriate funds from its ACU dollar or ACU euro or ACU yen and such other currencies including member countries domestic currencies as decided by the Board from time to time account with its correspondent bank in another participating country, it may sell the desired amount of ACU dollar or ACU euro or ACU yen and such other currencies including member countries domestic currencies as decided by the Board from time to time either to a local commercial bank which desires to fund its ACU dollar or ACU euro or ACU yen and such other currencies including member countries domestic currencies as decided by the Board from time to time account in that participating country, or to its central bank. In the latter case, it will request that bank to effect the remittance through the ACU mechanism. The correspondent bank will surrender equivalent amount of US Dollars or Euros or Japanese Yens to its own Central Bank for remittance. The participant receiving the amount will advise the participant in the country concerned to make available the equivalent amount to the concerned bank in that country. The Central Bank may, at its option, make the payment in US Dollar or Euro or Japanese Yen or in local currency. After making the payment the second participant will advise the Secretary General of the ACU to credit its account by debit to the first participant's account.
(e) On receipt of the advices referred to in sub-rules (b) and (c) above, the Clearing Union shall effect the necessary transfers under advice to both the participants.
(f) The minimum threshold amount for any transactions to be routed through the ACU mechanism referred in sub-rules (b) and (c) above shall be USD 500 or EUR 500 or JPY 50,000.
7. Exchange Rate: The SDR cross-rates which are quoted by the International Monetary Fund on a daily basis shall be applied as a reference rate. In the event that the International Monetary Fund does not quote the rates, the last available rate will apply until such rates become available. However, the Board may decide upon a substitute rate if necessary.
8. CURRENCY SWAP ARRANGEMENT: A participant desirous of availing of the swap facility as defined in Rule 3 (h) should request the Secretary General in such format as he prescribes. The nature and scope of swap arrangement will be as described hereunder:
(a) "Eligibility". Subject to sub-rule (d) of this Rule, any participant in net deficit (ACU dollar, ACU euro and ACU yen and such other currencies including member countries domestic currencies as decided by the Board from time to time accounts collectively) at the end of a settlement period shall be eligible to avail of the facility. Participants whose countries have special payment arrangements between themselves will not be eligible to avail of this facility from each other.
(b) "Entitlement". At the end of each calendar year, the Secretary General shall advise each participant by swift or cable or Message Management Module (MMM) or Tested Fax of its entitlement in ACU dollar using the exchange rate referred to in Rule 7. Every eligible participant shall be entitled to the facility from every other participant up to 20 percent of the average gross payments (ACU dollar, ACU euro and ACU yen and such other currencies including member countries domestic currencies as decided by the Board from time to time accounts collectively) made by it through the ACU mechanism to other participants during the three previous calendar years. A participant shall not, however, draw more than its net deficit (ACU dollar, ACU euro and ACU yen and such other currencies including member countries domestic currencies as decided by the Board from time to time accounts collectively) at the end of a settlement period. The drawal by each participant from each other participant shall be in the same proportion as its net deficit (ACU dollar, ACU euro and ACU yen and such other currencies including member countries domestic currencies as decided by the Board from time to time accounts collectively) bears to its maximum entitlement. The drawal may be effected in a currency (US Dollar or Euro or Japanese Yen and such other currencies including member countries domestic currencies as decided by the Board from time to time) decided by mutual agreement.
(c) "Rate of Interest". The rate of interest chargeable on each drawal would be equal to linear interpolation of Chicago Mercantile Exchange: Secured Overnight Financing Rate (CME SOFR) one month and three month for US Dollar or the Euro Interbank Offered Rate (EURIBOR) two month for Euro or two month LIBOR declared by the Inter-Continental Exchange for Japanese Yen, applicable for the concerned value date. If the rates are not available from the referred sources, the Secretary General shall ascertain it from any other London clearing bank at his discretion and if it is not available from any such bank, the rates of the referred sources applicable for the immediately preceding value date will apply.
(d) "Other Conditions". A participant may draw under the swap arrangement for a period of 2 months at a time. Such a participant shall not be entitled to draw under the arrangement at the time of the next following settlement.
9. ACCOUNTS KEPT BY THE CLEARING UNION: The Clearing Union shall maintain three accounts (ACU dollar, ACU euro and ACU yen and such other currencies including member countries domestic currencies as decided by the Board from time to time accounts) for each participant to which the payments advised by the participants will be debited or credited. Interest will be payable by the participants on the net debit balances and receivable on the net credit balances, calculated at the interest rate referred to in Rule 10, on the daily balances outstanding.
10. INTEREST:
(a) Interest on the net debit and net credit balance will be calculated by the Clearing Union on the daily outstandings by the product method, taking a year as comprising 360 days and shall be debited or credited to the participants' accounts at the end of each settlement period. 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 Chicago Mercantile Exchange Secured Overnight Financing Rate (CME SOFR) term one month for US Dollar, the Euro Interbank Offered Rate (EURIBOR) one month for Euro and the Inter-Continental Exchange (ICE) for one month Japanese Yen deposits. In the event that the referred sources do not quote rates for such deposits, the last available rate will apply until such rates become available. However, the Board may decide upon a substitute rate if necessary.
(b) If interest rate of any currency turns to be negative, it should be treated as zero.
(c) In the case of delayed payments referred to in Article VII section 2 of the Agreement and default referred to in section 3 of the same Article, interest for the period of delay or default shall be calculated by the Clearing Union at:
(i) one percent per annum over the rate for the relevant settlement period or periods under sub-rule (a), or;
(ii) one percent per annum over the rate applicable on the day of default under sub-rule (a), whichever is higher.
11. NOTIFICATION OF NET POSITION AT THE END OF SETTLEMENT PERIOD:
At the end of each settlement period, the Secretary General shall notify each participant by swift or cable or Message Management Module or Tested Fax of its net position and accrued interest, and of the amounts it shall pay or receive from other participants for ACU dollar, ACU euro and ACU yen and such other currencies including member countries domestic currencies as decided by the Board from time to time accounts separately.
12. SETTLEMENT OF BALANCES:
(a) Each debtor participant, within four working days of the receipt from the Secretary General of the notice of the amounts to be paid, shall make the payment in US Dollar or Euro or Japanese Yen or in any other mutually acceptable currency, under swift or cable or Message Management Module or Tested Fax intimation to the Secretary General.
Explanation: While computing the due date for payments, the debtor member should exclude holidays in their own country and holidays in the country where nostro accounts (for the settlement currency) are maintained by them.
(b) If settlement is desired to be effected in a currency other than US Dollar or Euro or Japanese Yen, the participants shall, by mutual agreement, decide on the exchange rate to be made applicable for such settlement.
(c) The minimum amount of USD 100.00 or EUR 100.00 or JPY 10,000.00 shall be settled in each settlement period. Any amount less than USD 100.00 or EUR 100.00 or JPY 10,000.00 will be transferred to the next settlement period/s till it reaches the minimum amount for settlement to be made.
13. OBLIGATION TO ACCEPT NET POSITION ADVISED BY THE SECRETARY GENERAL:
The net position at the end of the settlement period, as notified by the Secretary General shall be accepted by every participant as correct and settlement shall be made accordingly. The participant shall, however, have the right to bring any discrepancy detected in such position to the notice of the Secretary General as soon as possible thereafter for eventual rectification and further settlement if necessary. Such rectification shall be made at the same rate of exchange at which the original settlement was made.
14. DEFAULT: In the event that a participant fails to make any payment notified to it by the Secretary General under Rule 11 within the time specified, the provisions of Article VII section 3 of the Agreement shall apply.
15. ACCOUNTS KEPT BY COMMERCIAL BANKS: The member central banks shall issue circulars to the commercial banks to consider payment of interest, at their discretion, on ACU dollar, ACU euro and ACU yen and such other currencies including member countries domestic currencies as decided by the Board from time to time accounts maintained by the commercial banks of other ACU member countries as per mutually agreed terms and conditions.
16. PUBLICATIONS: The Secretary General shall use US Dollar as a base currency for the ACU financial reporting and publications. The ACU euro and ACU yen and such other currencies including member countries domestic currencies as decided by the Board from time to time accounts are converted to US Dollar using the exchange rate referred to in Rule 7.
17. PRESERVATION PERIOD OF RECORDS AT THE ACU SECRETARIAT:
(a) Permanent:
(i) ACU Agreement and Procedure Rules
(ii) Summary of Proceedings of ACU Board of Directors Meetings and Technical Committee Meetings
(iii) ACU Publications-Annual Reports
(iv) Correspondence
(b) Ten Years:
Annual ACU Board of Directors Meeting File
(c) Three Years:
(i) Vouchers, Statements, UNIONs and NPTRs
(ii) News Letters
(iii) Exchange and Interest Rates
(iv) Other Miscellaneous Items
Exception: In the event there is dispute pertaining to any transactions, preservation period of three years related to vouchers, statements, UNIONs, NPTRs, exchange and interest rates shall not be applicable till the dispute is resolved.
18. AMENDMENT: Unless otherwise provided in the Agreement, these rules may be amended by a decision of the Board taken by a majority of the votes of all of the Directors.
19. INVITATION OF AN OBSERVER TO THE ACU BOARD OF DIRECTORS MEETINGS:
(a) The request for participating as an observer should be received at least two months in advance of the Board of Directors Meeting.
(b) The Secretary General will communicate the request to all the Directors in the form of a letter.
(c) If no response is received from the Director within one month from the date of letter, it will be presumed that he/she has no objection to the proposal.
(d) The proposal has to be approved by all the Directors.
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