KARACHI, Dec 19: The State Bank of Pakistan on Friday announced inclusion of euro in the Asian Clearing Union mechanism.

“It has been decided to include euro as the second ACU currency along with USD from January 1, 2009,” said an SBP circular.

The regional countries to facilitate themselves have adopted a shortcut procedure for US dollar clearing mechanism. They had to get each clearing from United States but now they devised a mechanism to shorten time and get clearance from Asian Clearing Union of which Pakistan is also a member.

This would facilitate trade with the Europe in the same manner by reducing the time factor through ACU mechanism.

The ACU euro would be equivalent in value to one euro. Accordingly, transactions under ACU mechanism, in addition to ACU dollar (ACUD), may also be denominated and settled in ACU euro (ACUE) effective January 1, 2009.

The authorised dealers may establish ACUE accounts with their correspondents in ACU member countries and open their correspondents’ ACUE accounts with them.

The transactions in ACUE would be reported by the banks to SBP and settled by SBP separately i.e. independent of ACUD transactions. In other words, two separate accounting and settlement systems will be maintained; one for transactions conducted in ACUD and the other one for the ACUE.

“With a view to encourage the banks to maintain reasonable or sufficient balances in their accounts to ensure timely payments, the authorised dealers are hereby permitted to pay or receive interest, at their discretion, on ACUD and ACUE accounts as per mutually agreed terms and conditions,” said the circular.

The balances of ACUD and ACUE accounts together with other foreign currency Nostro accounts would however be subject to the overall exposure limits of the banks.