Stalemate between RBI, Euro mkt body over Clearing Corp regulation

MUMBAI: The possibility of a quick memorandum of understanding (MoU) between RBI and the European Securities and Markets Authority, allowing

Esma

to set terms to the

Clearing Corporation

of India, is looking unlikely as Indian authorities maintain that the agency cannot be subjected to “extra-territorial” regulation.
Although Esma has not imposed penal charges on

European banks

that deal through the CCIL, others such as

Deutsche Bank

, BNP Paribas, Societe Generale, and Credit Agricole now face higher

capital requirements

for these transactions.

Esma has been advocating for an MoU compliant with the European Market Infrastructure Regulation (EMIR), aimed at enhancing transparency and stability of the over-the-counter

derivatives market

. This would require entities to report their trades and mandate that certain derivatives be cleared through central counterparties to mitigate systemic risk. Both RBI and the Indian govt are concerned about the implications of such an agreement, which would mean accepting Esma’s regulatory oversight on Indian entities.
In light of these concerns, RBI and govt are exploring alternative arrangements, including utilising specific banks like Deutsche Bank to facilitate transactions within India’s regulatory framework while preserving national sovereignty. They are also considering the establishment of a designated primary dealer through which Indian branches of European banks can operate in the securities market. The friction between RBI and Esma arises from Esma’s decision to de-recognise the CCIL.