The Clearing Corporation of India is an RBI-supervised corporation that operates the platform for trading domestic government bonds. The Reserve Bank of India (RBI) and the European Securities and Markets Authority (ESMA) are close to resolving differences over the treatment of the former's bond trading platform, according to a senior government official, who added that trading will not be hampered while the two sides work out a solution. "The regulators are in talks and working on a solution," the official stated.
The issue dates back to October 2022, when ESMA announced its intention to de-recognize the Clearing Corporation of India, an RBI-supervised business that operates the platform for dealing domestic government bonds. The European regulator cited a lack of permit rights for audit and inspection of the local clearing house as the cause for the move.
According to ESMA regulations, any service used by European banks from non-European firms must be reviewed by ESMA. However, India is reported to have refused to grant the European regulator supervisory authority over Indian clearing businesses.
The derecognition by ESMA, which began on April 30, 2023, was verified on May 2, 2023. However, a few regulators in particular parts of Europe have allowed their banks to trade on CCIL without incurring penalties until October 2024.
The Deadline Approaches
With the October 2024 deadline to discontinue transactions with CCIL approaching, there is an urgent need to find a solution. "Settlement will not be harmed until a solution is reached," the above-mentioned official stated on the deadline.
According to an a credible story from May 2024, up to four European banks have urged the Reserve Bank of India to authorize a third-party transaction model to break a standoff between their home authorities and Indian officials over audit monitoring rights.
Credit Agricole, Societe Generale, Deutsche Bank, and BNP Paribas are having difficulty trading Indian government bonds and derivatives after ESMA de-recognised the CCIL in October 2022. According to the report, the four European banks were awaiting either central bank permission for the third-party approach or a resolution to the ESMA-RBI audit oversight disagreement.
