RBI, European body ink MoU to end clearinghouse deadlock

Mumbai: The Reserve Bank of India (RBI) and the European Securities and Markets Authority (ESMA) have signed a Memorandum of Understanding (MoU), ending a two-year standoff over the supervision of India’s central clearing agencies. The agreement will facilitate cooperation and information exchange and pave the way for recognition of central counterparties based in India and supervised by RBI.

According to experts, this could significantly improve European access to Indian financial markets. Without such recognition, European banks face higher costs when trading Indian bonds, discouraging participation, they said.

“This creates a framework for ESMA to rely on RBI’s regulatory and supervisory activities while protecting the financial stability of the European Union,” RBI said on Tuesday.

It signifies ESMA’s agreement to rely on the RBI’s regulatory and supervisory oversight of Indian financial market entities, rather than exercising direct supervision itself, while ensuring that such dependence does not endanger the stability of the European Union’s financial system.

ESMA withdrew recognition of six Indian clearing houses in October 2022 after regulatory issues remained unresolved. The European regulator had requested changes to the cooperation agreement, but Indian authorities opposed granting ESMA supervisory powers to inspect Indian clearing houses.

The revised MoU will allow the Clearing Corporation of India to reapply for recognition under the European Market Infrastructure Regulation, ESMA said in a statement