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Informist, Monday, Oct. 28, 2024

 

--RBI notifies updated directions on functioning of central counterparties 

 

NEW DELHI – The Reserve Bank of India Monday laid out stringent norms for the technical committee of a central counterparty to focus on emerging risks from the information technology sector. The RBI notified updated norms for the functioning of central counterparties Monday.

 

The new guidelines said the technical committee shall meet at least once a quarter and ensure that the central counterparty has processes in place for assessing and managing information technology and cybersecurity risks. It also expanded the committee's role to guide the company's IT strategy, ensuring that the strategy aligns with the counterparty's business objectives.

 

"...satisfy itself that the IT Governance and Information Security Governance structure fosters accountability, is effective and efficient, has adequate skilled resources, well-defined objectives and unambiguous responsibilities for each level in the organisation..." the RBI notification said.

 

The technical committee's prior responsibilities were restricted to only oversight and advice on information technology practices and monitoring of key systems. The committee would continue to be headed by a sector expert in information technology who is an independent director, the RBI said. The prior directions for central counterparties, updated in June 2019, are now scrapped, the central bank said.

 

The new norms also made changes to the central counterparty's risk management committee. The independent director heading the committee cannot head any other board committee, the new rules said. Both the committee chairperson and one of the independent directors should have expertise in risk management. The committee must also meet at least once a quarter, and inform the wider board of directors on significant changes to risk models.

 

The audit committee must now also have two-thirds of its members as independent directors, instead of just a majority earlier. In addition to these norms on the board's committees, the RBI increased minimum quorums on board meetings and committee meetings to three from two. For the audit committee, two-thirds of the quorum must be independent directors. For the nomination and remuneration committee, the risk management committee, and meetings of the entire board, at least half of the quorum should be independent directors, the RBI said.

 

Many of the other guidelines carry over from the previous directions. The regulator retained the required net worth for application as a central counterparty to INR 3 billion. It also does not make any changes to the eligibility criteria for either domestic or foreign central counterparties operating in India.  End

 

Reported by Aaryan Khanna

Edited by Deepshikha Bhardwaj

 

 

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