Amid European financial market regulators’ decision to de-recognise domestic clearing corporations, the Reserve Bank of India governor Shaktikanta Das Wednesday said that the foreign regulators should trust the credibility of Indian regulations.
“It is also necessary for regulators on the other side to appreciate and trust the credibility and strength of Indian regulations. That is what we are trying to impress upon them,” Das said in the post-policy interaction with the media.
In October this year, European Securities and Markets Authority (ESMA) announced that it will withdraw the recognition of six Indian third country central counterparties (TC-CCPs) — the Clearing Corporation of India (CCIL), Indian Clearing Corporation Ltd (ICCL), NSE Clearing Ltd (NSCCL), Multi Commodity Exchange Clearing (MCXCCL), India International Clearing Corporation (IFSC) Ltd (IICC) and NSE IFSC Clearing Corporation Ltd (NICCL) — under the European Market Infrastructure Regulation (EMIR) regime. It, however, said the withdrawal decision will come into effect from may 1, 2023. The Bank of England also took a similar decision.
CCPs perform two main functions as the intermediary in a transaction — clearing and settlement — and guarantee the terms of a trade.
Das further said the current market infrastructure of India is much more robust than what it used to be 10-30 years back.
“We are fully compliant with the Committee on Payments and Market Infrastructures (CPMI) guidelines under the aegis of the Basel framework and we comply with all the CPMI and international standards,” he stated.
CPMI is an international standard setter that promotes, monitors and makes recommendations about the safety and efficiency of payment, clearing, settlement and related arrangements, thereby supporting financial stability and the wider economy.
It also serves as a forum for central bank cooperation in related oversight, policy and operational matters, including the provision of central bank services.
RBI Deputy Governor T Rabi Sankar said the fundamental point of divergence between the RBI and European regulators is that an Indian entity that does not operate in the European Union (EU) and operates entirely in India, is being subjected to regulations by an EU regulator.
“Like Japan, we have an agreement with them, they simply went ahead. They made an assessment and it’s good enough, it’s equivalent. Similar things can be done. We are working towards that,” Sankar said.
On November 30m RBI and the Financial Services Agency (FSA), Japan exchanged letters of cooperation in the field of CCPs aimed at improving mutual cooperation.
Sankar said the discussions with ESMA are going on and hoped to achieve some sort of understanding on the issue.
“There is no disturbance as of now. Should there be any possibility of disturbance, we will be well prepared,” he added.