RBI and BoE Strengthen Ties through MoU on CCIL
In a significant move, the Reserve Bank of India (RBI) and the Bank of England (BoE) inked a Memorandum of Understanding (MoU) on collaboration and information exchange concerning the Clearing Corporation of India Ltd (CCIL). CCIL, functioning as a central counterparty (CCP), plays a pivotal role in clearing and settling transactions in government securities, foreign exchange, and money markets within India, under the regulatory oversight of the RBI.
Background on CCIL Recognition and ESMA’s Action
Last October, the European Securities and Markets Authority (ESMA) announced the withdrawal of recognition for six Indian CCPs, including CCIL. This decision followed a disagreement wherein the RBI resisted ESMA’s supervision of domestic CCPs, asserting their robust risk management practices and deeming foreign regulatory scrutiny unnecessary.
Framework for Cooperation and Cross-Border Commitment
The MoU establishes a structured framework allowing the BoE to rely on the RBI’s regulatory and supervisory activities concerning CCIL. Emphasizing the significance of cross-border collaboration, it aims to facilitate international clearing activities while ensuring the stability of the UK’s financial system. The agreement underscores the BoE’s commitment to acknowledging and deferring to the regulatory regimes of other authorities.
MoU’s Impact on CCIL Recognition
Beyond cooperation, the MoU serves as a pivotal step for the BoE to assess CCIL’s application for recognition as a third country Central Counterparty (CCP). Such recognition is crucial for UK-based banks seeking to conduct transactions through CCIL.
Promoting Regulatory Harmony and International Cooperation
This MoU reinforces the shared interests of the RBI and BoE in strengthening cooperation within the bounds of their respective laws and regulations. It signifies a commitment to mutual understanding and paves the way for smoother international financial transactions, fostering regulatory harmony between the Indian and UK financial systems.
In summary, the collaborative MoU between the RBI and BoE marks a significant stride towards enhancing regulatory cooperation, facilitating international clearing activities, and addressing the recognition concerns surrounding CCIL in the global financial landscape.
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