All European banks, over the last 48 hours in India have been thrown into a dilemma. They are left knocking on the doors of the regulators with the European Union financial markets authority. The Bank of England is derecognising some of the key institutions in India through which significant volumes of trades on foreign exchange, derivatives, government bonds and securities are settled.
According to media reports, the European banks operating in India may soon find it difficult to operate viably unless the Reserve Bank of India (RBI) and Securities and Exchange Board of India (Sebi) are able to negotiate fresh terms with the European Securities and Markets Authority (ESMA) on oversight of counter-party institutions.
Previously, the EU’s financial markets regulator and supervisor said, “Six of India’s central counterparties (CCPs) would be de-recognised in accordance with the European Market Infrastructure Regulation, following an assessment conducted by it. However, to mitigate the adverse impact on EU market participants, it has deferred implementing the decisions until April 30, 2023. Should the discussions fail, European banks may need to operate with levels of capital that are 40-50 times higher than what is required today.”
The six institutions on ESMA’s list are The Clearing Corporation of India (CCIL), supervised by RBI, Indian Clearing Corporation (ICCL), Multi Commodity Exchange Clearing (MCXCCL), and NSE Clearing (NSCCL), supervised by Sebi; India International Clearing Corporation (IFSC) (IICC) and the NSE IFSC Clearing Corporation (NICCL), supervised by the International Financial Services Centre Authority (IFSCA).
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