In a significant step towards strengthening cross-border financial cooperation, the Reserve Bank of India (RBI) and the Bank of England (BoE) signed a Memorandum of Understanding (MoU) on Friday. This agreement marks the end of a long-standing deadlock between the two regulatory bodies regarding the supervisory authority over Indian clearing houses.
The MoU establishes a framework for the BoE to recognize and rely on the RBI’s regulatory and supervisory activities in overseeing Indian clearing corporations. This arrangement aims to safeguard financial stability in both India and the UK.
“The MoU also underscores the importance of cross-border cooperation in facilitating international clearing activities and the BoE’s commitment to respecting the regimes of other regulators,” stated the RBI. The MoU was signed in London by RBI Deputy Governor T Rabi Sankar and BoE Deputy Governor for Financial Stability Sarah Breeden.
According to the RBI, the MoU aligns with the interests of both authorities in enhancing cooperation within the legal and regulatory frameworks of their respective jurisdictions. It will also enable the BoE to evaluate CCIL’s application for recognition as a third-country Central Counterparty (CCP), a prerequisite for UK-based banks to clear transactions through CCIL.
In May, the European Securities and Markets Authority (ESMA) delisted six Indian clearing houses due to non-compliance with European Market Infrastructure Regulation (EMIR) norms. These six clearing corporations include the Clearing Corporation of India (CCIL), Indian Clearing Corporation, NSE Clearing, Multi Commodity Exchange Clearing, India International Clearing Corporation, and NSE IFSC Clearing Corporation.
Clearing corporations play a crucial role in ensuring the smooth and secure clearing and settlement of transactions in various financial markets.