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Informist, Thursday, Nov. 7, 2024

 

--RBI Sankar on ESMA-CCIL:Talks on, may strike deal similar to Bank of England 
--RBI Sankar on ESMA-CCIL row: No deadline for now 
--RBI Sankar: Maintain that ESMA is being extra jurisdictional 
 

MUMBAI – The Reserve Bank of India and the European Securities and Markets Authority are currently negotiating a mechanism needed for foreign lenders to continue dealing on Clearing Corp of India, and a pact similar to the one signed with the Bank of England might be finalised, the central bank's deputy governor T. Rabi Sankar said Thursday. "The negotiations are on, but for an agreement like Bank of England's, European regulator will have to change their law, and that may take time," Sankar said on the sidelines of Business Standard BFSI Summit. 

 

In the meanwhile, status quo continues as currently, there is no deadline that foreign lenders dealing on Clearing Corp of India need to adhere to, Sankar said. 

 

In October 2022, ESMA had said it planned to de-recognise six Indian clearing houses, including Clearing Corp of India, from Apr. 30, 2023. It confirmed this de-recognition on May 2, 2023. However, the national regulators of France and Germany allowed their banks--namely Credit Agricole, Societe Generale, BNP Paribas, and Deutsche Bank--to trade on the Clearing Corp of India platform until October 2024 without paying any penal charges.

 

In Europe, third-party central counterparties must be supervised by the markets regulator directly. This includes allowing audits and penalties on the counterparty or through "comparable compliance" in other jurisdictions. Since the RBI did not agree with this 'extra-territorial' supervision, recognition for the counterparties was withdrawn.

 

"We will maintain our stance that ESMA is being extra jurisdictional," Sankar reiterated Thursday.

 

In December, the RBI and BoE had signed a memorandum of understanding that established a framework under which the latter relied on the RBI's regulatory and supervisory activities to safeguard the UK's financial stability.

 

"These MoUs or agreements with respect to market infrastructure agencies like CCIL should be underpinned by the word that is used in their regulations – cooperation," Sankar had noted after signing the MoU. "We believe that they should follow the principle of mutual respect and the principle of mutual trust. They should also be characterised by the principle of deference to local regulations. In other words, we are not comfortable with the regulations anywhere which are characterised by extraterritorial jurisdiction."  End

 

Reported by Priyasmita Dutta and Sagar Sen

Edited by Avishek Dutta

 

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