A meeting late last month between senior officials of the Reserve Bank of India (RBI) and European banks was the ice-breaker in protracted discussions over the foreign regulators’ de-recognition of CCIL. European banks trading in India that stand to be the most affected by the negotiations are Credit Suisse, BNP Paribas, Societe Generale and Deutsche Bank.
In the latest round of meetings, the RBI officials were said to have been more amenable to signing a new memorandum of understanding (MoU) with overseas regulators if their demand to inspect and audit the CCIL’s books and potentially levy penalties – the key bone of contention – is softened considerably, or circumvented in a way that does not undermine the sovereign regulatory rights.
“The RBI was said to have been more receptive about the MoU than before,” said a source aware of the developments. “The RBI was said to have been more positive than in the previous meeting where it was absolutely adamant that there would be no MoU – nothing of the sort. At least, they are said to be happy to explore a potential solution.”
An email sent to the RBI on the matter remained unanswered until the publication of this report.
European Lenders
De-recognition of CCIL, which hosts the trading platforms for Indian government bonds and derivative products, would severely hamper the trading operations of several of the continental European banks. Several such entities with trading operations here are custodians of foreign investment flows.”Some new regulations are likely to come in Europe, the latest version of EMIR (European Market Infrastructure Regulation),” another banking source told ET.
“The idea is that before the (October 2024) extension comes to an end, the RBI and the regulators get on the same page and the European regulations themselves change. It would be a much more diluted version.”
In February, German and French financial supervisory authorities took a more relaxed view of an earlier deadline of April 30, 2023, imposed by the European Securities and Markets Authority (ESMA) and provided their banks with an extension of the deadline until October 2024.
Subsequently, reports quoted the ESMA as saying last month said that while European banks could continue to do business with Indian clearing houses such as the CCIL, they would face a penal capital charge.
The tussle with the ESMA began in October 2022 as the European body announced de-recognition of six Indian clearing houses, including the CCIL.
