New Delhi: The Reserve Bank of India (RBI) and the Bank of England (BoE) officially inked a memorandum of understanding (MoU) recently, solidifying their cooperation and information exchange concerning the Clearing Corporation of India Ltd (CCIL).
CCIL, a central counterparty (CCP) regulated by the RBI, plays a pivotal role in providing clearing and settlement services for transactions in government securities, foreign exchange, and money markets within India. Notably, last October, the European Securities and Markets Authority (ESMA) withdrew recognition from six Indian CCPs, including CCIL.
The newly signed MoU establishes a framework for the BoE to rely on the regulatory and supervisory activities of the RBI, underscoring the commitment to international cooperation in facilitating clearing activities while ensuring the stability of the UK’s financial system. This development comes in the aftermath of ESMA’s decision, which followed the RBI’s reluctance to allow foreign regulators to supervise domestic CCPs, citing robust risk management practices.
RBI Governor Shaktikanta Das, addressing the fallout, emphasised the need for foreign regulators to trust the credibility of Indian regulations. Das highlighted the substantial improvement in India’s market infrastructure over the past decades.
Earlier this year, CCIL applied to the Bank of England for recognition as a third-country CCP (TC-CCP). The MoU, according to the RBI, confirms the mutual interest of both authorities in enhancing cooperation within the bounds of their respective laws and regulations.
Moreover, it enables the BoE to assess CCIL’s application for recognition, a prerequisite for UK-based banks, such as Barclays and Standard Chartered, to continue providing clearing and settlement services in India.
RBI Deputy Governor T Rabi Sankar and BoE Deputy Governor for Financial Stability Sarah Breeden signed the MoU in London on Friday. The agreement is expected to provide relief to UK-based lenders operating in India, ensuring the seamless provision of clearing and settlement facilities to their clients.
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