Introduction
The Asian Clearing Union (ACU) is a regional financial and payment arrangement established to facilitate trade and payment settlements among member countries in Asia. It was created on December 9, 1974, at the initiative of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
The main objective behind the establishment of the ACU was to promote regional monetary cooperation and simplify the settlement of international payments among member countries through a multilateral clearing mechanism. Instead of settling every transaction separately in foreign currencies, the ACU provides a system where payments among member countries can be cleared on a multilateral basis, thereby reducing the need for large foreign exchange reserves and improving regional trade efficiency.
The Asian Clearing Union plays an important role in encouraging financial cooperation among Asian countries and strengthening regional economic integration.
Meaning of the Asian Clearing Union
The Asian Clearing Union is a payment arrangement among the central banks of participating countries. It enables member countries to settle eligible cross-border trade transactions through a centralized multilateral clearing mechanism.
Under this system, payments and receipts among participating countries are accumulated over a specified period, and only the net balances are settled. This process reduces the amount of foreign exchange required for international trade settlements.
The ACU mainly deals with transactions related to imports and exports of goods and services among member countries.
Objectives of the Asian Clearing Union
The ACU was established with several important objectives aimed at improving regional financial cooperation and trade facilitation.
One of the major objectives is to facilitate settlement of payments on a multilateral basis among member countries. Instead of making separate bilateral settlements for every transaction, countries can settle net balances collectively through the ACU mechanism.
Another important objective is to promote the use of participants’ currencies in international trade transactions. This helps reduce excessive dependence on external reserve currencies and strengthens regional monetary cooperation.
The ACU also aims to promote closer monetary cooperation among participating countries. Through coordinated financial arrangements and payment systems, member countries can improve economic relations and regional integration.
An additional objective is to provide currency swap arrangements among participants. This helps countries facing temporary liquidity shortages gain access to foreign exchange resources from other members.
Settlement Process of ACU
Bi-Monthly Settlement System
The ACU follows a bi-monthly settlement system. This means that settlements among member countries are conducted once every two months.
During the settlement period, all eligible transactions among member countries are recorded and accumulated. At the end of the period, the net balances are calculated for each participant.
Countries with net deficits are required to make payments, while countries with net surpluses receive funds.
Payment Deadline
The payment settlement deadline under the ACU mechanism is generally fixed at T+4, which means settlement must be completed within four working days after the settlement date.
This system ensures timely and efficient settlement of international trade transactions among participating countries.
Currency Swap Arrangements
The ACU also provides currency swap facilities to member countries. These arrangements are designed to help participants facing temporary payment imbalances or liquidity shortages.
A participant that has a net deficit position becomes eligible for swap support. Requests for swap arrangements must be made before the end of the settlement period.
The maximum amount available under the swap arrangement is generally equal to 20 percent of the average gross payments made by the eligible participant through ACU dollar, ACU euro, and ACU yen accounts collectively.
The interest rate for swap arrangements is linked to international benchmark rates such as:
- CME SOFR for U.S. Dollar
- EURIBOR for Euro
- ICE LIBOR-related benchmark for Japanese Yen
These benchmark rates are used to determine the applicable borrowing cost under the swap mechanism.
Benefits of Currency Swap Arrangements
The currency swap facility under the ACU provides several important benefits to member countries.
It allows easy access to international reserves of other participating countries during periods of temporary liquidity pressure. This reduces the risk of payment disruptions in international trade transactions.
The facility is available on a multilateral basis, which strengthens regional cooperation and financial support mechanisms among participating countries.
The swap arrangement also promotes greater monetary cooperation and financial stability in the region by encouraging coordination among central banks.
ACUMER and Digital Payment Developments
In February 2025, representatives of the Standing Technical Committee of the Asian Clearing Union held a meeting in Dhaka to discuss improvements in cross-border payment systems.
One of the important topics discussed was the implementation of ACUMER, a specially designed platform intended to facilitate cross-border payment transactions more efficiently. The meeting focused on simplifying international payment methods and exploring the possible use of digital currency within the ACU framework.
Recommendations were made to member countries such as Bangladesh, Bhutan, Iran, India, Maldives, Nepal, Pakistan, Sri Lanka, and Myanmar to join the ACUMER platform before the proposed deadline of March 2025 and complete necessary financial transaction arrangements.
The discussions reflected the growing importance of digital financial systems and modern payment technologies in regional monetary cooperation.
Units of Account in ACU
The Asian Clearing Union uses special accounting units known as Asian Monetary Units (AMUs).
The AMUs are denominated as:
- ACU Dollar
- ACU Euro
- ACU Yen
Each unit is equivalent in value to its corresponding international currency:
| ACU Unit | Equivalent Currency |
|---|---|
| ACU Dollar | 1 U.S. Dollar |
| ACU Euro | 1 Euro |
| ACU Yen | 1 Japanese Yen |
These units are used for accounting and settlement purposes within the ACU mechanism.
Interest Mechanism in ACU
Interest under the ACU system is payable by net debtor countries at the end of each settlement period.
The interest is calculated on the basis of daily outstanding balances between settlement dates. The applicable interest rates are linked to internationally recognized benchmark rates.
For different currencies, the reference rates include:
- CME SOFR one-month rate for U.S. Dollar
- EURIBOR one-month rate for Euro
- ICE benchmark for one-month Japanese Yen deposits
This system ensures fairness and transparency in calculating interest obligations among participating countries.
Exchange Rate Mechanism
The exchange rate system of the ACU uses the Special Drawing Rights (SDR) cross-rates quoted daily by the International Monetary Fund (IMF) as reference rates.
Using SDR-based exchange rates helps maintain stability and uniformity in settlement calculations among member countries.
Benefits of Becoming an ACU Member
Membership in the Asian Clearing Union provides several important economic and financial benefits.
One major advantage is the saving of foreign exchange reserves through multilateral netting and bi-monthly settlement. Since only net balances are settled, countries require less foreign currency for international trade payments.
The ACU also helps address trade imbalances and encourages greater trade and monetary cooperation among participating countries.
Member countries do not need to accumulate large quantities of each other’s currencies because settlements are conducted through the ACU mechanism.
Membership improves access to new markets and supports monetary integration and financial deepening in the region.
Another advantage is the possibility of using major reserve currencies such as the U.S. Dollar, Euro, and Japanese Yen through the ACU framework.
The ACU does not charge any membership fee, making participation more attractive for eligible countries.
The system also improves clearing efficiency and reduces transaction costs in regional trade settlements.
Members of the Asian Clearing Union
As of 2024, the members of the ACU include the central banks of several Asian countries.
| Country | Central Bank | Year of Membership |
|---|---|---|
| Bangladesh | Bangladesh Bank | 1974 |
| Bhutan | Royal Monetary Authority of Bhutan | 1999 |
| India | Reserve Bank of India | 1974 |
| Iran | Central Bank of the Islamic Republic of Iran | 1974 |
| Maldives | Maldives Monetary Authority | 2009 |
| Myanmar | Central Bank of Myanmar | 1977 |
| Nepal | Nepal Rastra Bank | 1974 |
| Pakistan | State Bank of Pakistan | 1974 |
| Sri Lanka | Central Bank of Sri Lanka | 1974 |
| Belarus | National Bank of Belarus | 2024 |
The central banks of member countries issue detailed operational guidelines for routing eligible international transactions through the ACU system.
Membership is open to central banks located within the geographical area of ESCAP as well as non-ESCAP countries.
Eligible Transactions Under ACU
All eligible transactions between member countries are required to be cleared through the ACU mechanism.
Eligible transactions generally include payments:
- From a resident of one participant country to a resident of another participant country
- Related to imports and exports of goods and services
- Permitted under the foreign exchange regulations of the payer’s country
- Not specifically declared ineligible by the Board of Directors or a participant country
This framework ensures that only approved and legitimate trade-related transactions are settled through the ACU system.
Instruments of Payment
The ACU permits the use of various payment instruments denominated in Asian Monetary Units.
Payments can be made using instruments denominated in:
- ACU Dollar
- ACU Euro
- ACU Yen
These instruments facilitate smooth and standardized settlement among participating countries.
Importance and Performance of ACU
The Asian Clearing Union plays a significant role in promoting regional trade and financial cooperation in Asia. By reducing dependence on hard currencies for every transaction and enabling multilateral netting, the ACU helps conserve foreign exchange reserves and improve payment efficiency.
The ACU mechanism has handled substantial transaction volumes over the years. In 2021, transactions settled through the ACU system amounted to approximately 29 billion U.S. dollars.
This demonstrates the continuing importance of the ACU as a regional payment and settlement arrangement.
Conclusion
The Asian Clearing Union is an important regional financial institution that promotes monetary cooperation and efficient payment settlements among Asian countries. Established in 1974 under the initiative of ESCAP, the ACU provides a multilateral clearing mechanism that reduces foreign exchange requirements, improves trade settlement efficiency, and strengthens regional economic integration.
Through its settlement system, currency swap arrangements, and modern initiatives such as ACUMER, the ACU continues to evolve in response to changing global financial conditions and technological developments. It remains an important platform for enhancing regional trade, financial cooperation, and monetary stability among participating countries.