UK Regulators Close To Resolving Indian Clearing House Impasse: Report

The UK government has said that Indian clearing houses, supervised by the RBI, meet its regulatory standards. This change is a prerequisite for the BoE to recognise overseas counterparties

The EU markets regulator European Securities and Markets Authority (ESMA) in May de-recognised six Indian clearing houses due to non-compliance with European Market Infrastructure Regulation norms.

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The United Kingdom (UK) government has said that Indian clearing houses, supervised by the RBI, meet its regulatory standards. The development has the potential to resolve the current deadlock regarding the oversight of local counterparties by overseas regulators, reported Bloomberg. "The legal framework of India, as implemented by the Reserve Bank of India, provides for an effective equivalent system for the recognition of central counterparties authorized under other regimes of other countries,” the UK Treasury documents said.

This change is a prerequisite for the Bank of England to recognise overseas counterparties, said the report. 

European and British banks were facing the risk to shift away from the platform. The EU markets regulator European Securities and Markets Authority (ESMA) in May de-recognised six Indian clearing houses due to non-compliance with European Market Infrastructure Regulation norms. The six clearing corporations are The Clearing Corporation of India (CCIL), Indian Clearing Corporation, NSE Clearing, Multi Commodity Exchange Clearing, India International Clearing Corporation, and NSE IFSC Clearing Corporation. The British ruling was also set to take effect in July.

British banks such as Barclays Plc and Standard Chartered Plc have a significant presence in India. As per the report, with this development, they can now continue their trading activities in the country using the Clearing Corp. of India platform. This is crucial because there was a risk of disruption in trading worth hundreds of billions of rupees in government bonds and interest-rate derivatives.

As per reports, ESMA had requested the Reserve Bank of India, the Securities and Exchange Board of India, and the International Financial Services Centres Authority to enter into an agreement granting it supervisory authority over Indian clearing corporations that provide services to European banks. These clearing corporations had been recognised as Third Country Central Counterparties (TC-CCP) within the European Union.

Nevertheless, non-British banks are still facing an ongoing standoff as ESMA has revoked recognition for their counterparties. In contrast, German and French regulators have granted an extension of 18 months to their banks for the transfer of trading positions from Indian clearing houses.