ESMA Takes Center Stage In Effort To Break Regulatory Deadlock Over India's Bond Clearing House

ESMA addresses oversight deadlock with German and French regulators for India's main bond clearing house, echoing London's protection of European lenders
Regulatory Watch
Regulatory Watch

In an effort to resolve a regulatory impasse involving India's primary bond clearing house, the European Securities and Markets Authority (ESMA) convened a series of meetings over the past few days with regulatory counterparts in Germany and France.

According to a report, this initiative seems to be aligned with London's approach to safeguarding the interests of lenders from continental Europe, institutions such as BNP Paribas and Deutsche Bank, which are actively engaged in Mumbai's increasingly globalized and closely scrutinized sovereign debt market.

French and German banks are likely to face a considerable disadvantage relative to other foreign banks operating in India due to the prolonged 14-month dispute with the RBI over the oversight of Clearing Corp of India (CCIL). This situation is further complicated by the formal recognition of the local bond clearing house by the UK, as per a report by the Economic Times.

ESMA and Paris-based regulators are working urgently to resolve the CCIL oversight issue by February-March, signaling a proactive approach by ESMA. This shift in initiative, noted by a source, contrasts with the prior emphasis from the concerned banks in Europe's affluent regions.

Last year, ESMA de-recognized CCIL, the RBI-supervised clearing body for domestic bonds and derivatives, due to the RBI's denial of audit rights. National regulators like AMF (Autorite des marches financiers of France) and BaFIN (the German Federal Financial Supervisory Authority) granted banks in their jurisdictions an extended 18-month compliance period until October 2024 to align with ESMA's decision.

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