RBI Secures Supervisory Authority Over Clearing Corporation of India as ESMA Relents

Clearing Corporation of India Ltd (CCIL) Oversight Dispute Resolved

On 27 January, the Reserve Bank of India (RBI) and the European Securities and Markets Authority (Esma) signed a memorandum of understanding (MoU), resolving a three-year impasse over oversight of CCIL. The MoU concludes India-EU free trade negotiations and addresses long-standing differences between the RBI and Esma over supervisory access to Indian clearing corporations.

Key Developments

• Esma has dropped its insistence on directly supervising CCIL, instead agreeing to rely on the RBI's regulatory and supervisory framework.
• The European watchdog has also agreed to address India's concerns around "extraterritoriality" in the next revision of the European Market Infrastructure Regulation (EMIR).
• This change is expected to eliminate the need for CCIL to apply for fresh recognition in the coming years, removing uncertainty over potential dual oversight.

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Background

• The dispute dates back to May 2023, when Esma withdrew recognition of six Indian clearing houses, including CCIL, due to differences over supervisory access.
• The EMIR framework was introduced by the European Union in 2012 to improve transparency and reduce systemic risk in over-the-counter derivatives markets.

Outlook

• The agreement is seen as a positive outcome for India's central bank, reflecting the country's increasing weight in the global financial system.
• Market participants view the development as a step towards strengthening India's market profile, although external sector pressures remain a concern.
• The Securities and Exchange Board of India and the International Financial Services Centres Authority aim to conclude information-sharing agreements with Europe's securities regulator within the next 60 days, paving the way for the five currently unrecognized Indian clearing houses to seek re-recognition from the European Union.

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