ishrat husain : the asian clearing union welcome address by mr ishrat husain, governor of the state bank of pakistan, at the inaugural ceremony of the 34th annual meeting of the board of directors of the asian clearing union ( acu ), lahore, 16 may 2005. * * * it is a great honour for the state bank of pakistan to host the 34th annual meeting of the board of directors of the asian clearing union. i welcome you all to pakistan and wish you a pleasant and productive stay in our country. it is also indeed a pleasure for me to welcome the guests from afghanistan and the maldives monetary authority, who are attending this conference as observers. we all are familiar with the purpose and background of the asian clearing union. we have also reviewed each year the progress that was made and problems that our members had faced in international trade and payments and tried to modify the coverage, mechanism and procedure of the asian clearing union. what i wish to emphasize today is that major changes have taken place in the international scene during the last one year which necessitates our taking a closer look at the record and relevance of the asian clearing union in relation to fast changing global environment. in the rapidly changing environment, in which regional grouping is becoming a vehicle for trade promotion and economic co - operation, the asian clearing union should revisit its charter, examine its relevance and find ways to expand the intra - regional trade and economic co - operation in a multilateral context. we have to be outward looking and our objective should be to bring about coherence and consistency in our macroeconomic policies that attract direct foreign investment. the annual report of acu for the current year ( 2004 ) indicates that even though intra - regional trade is growing, the operations through the asian clearing union are limited. our efforts to expand its membership have not as yet succeeded. however, i may add here that the acu has not experienced a default. although there have been persistent debtors in the acu system, their negative net balances have not been large. there has not been a " structural creditor problem " in the acu. i would like the governors to give some thought as to how we can make asian clearing union an important vehicle for the expansion of intra - regional trade and further economic coordination, and how our banking and financial markets could be made complementary for the maximization of economic welfare of the member states. asian countries have demonstrated during the last several decades that it is possible

to remove as much of the subjectivity as possible. the duty to consult with other regulatory bodies is of paramount importance. in any application of this sort, section 37 of the banks act requires a decision to be made by the minister of finance, after the registrar of banks has made a recommendation, subsequent to consultation with the competition commission. the registrar also has to engage the two banks in discussions, consult with other domestic and international regulators, and consult with the governor and deputy governors of the reserve bank. further, the banks act prescribes that the competition authorities must be consulted on competition issues in an application of this nature. however, prior to the amendments to the competition act, which came into effect in february this year, the act did not apply to applications " subject to or authorised by public regulation ". further, section 54 of the banks act says that no arrangement involving a bank and no arrangement for the transfer of the bank ’ s assets and liabilities, or a part of them, can be legally executed unless the consent of the minister of finance is conveyed through the registrar. this section does not contain a provision requiring consultation with the competition commission. in applications like these, the minister of finance has to be satisfied that the proposal is not contrary to the interests of the public, the depositors, and the bank concerned or to its controlling company. the minister of finance rejected nedcor ’ s bid based on the grounds, among others, that south africa ’ s already highly concentrated banking sector would be compounded by the merger ; the size of the merged bank would affect the banking authorities ’ ability to contain systemic crises ; and the potential social costs, such as job losses, outweighed the efficiency gains of the merger. the minister of finance took into account the recommendations of the registrar of banks and the competition commission, which had both opposed nedcor ’ s bid on the grounds of pub lic interest. in this case, the supreme court of appeal ruled that the registrar and the minister of finance had sole jurisdiction over share acquisitions in banks and banking mergers. as a result of this judgement, the department of trade and industry made certain amendments to the competition act. it deleted the provision that the competition act did not apply to acts authorised by public regulation. further, the minister of finance has the power to exclude the competition commission ’ s jurisdiction by issuing a notice. 5. concurrent jurisdiction the amendments established a concurrent jurisdiction between the competition commission, the registrar and the minister of finance. this concurrent jurisdiction