ESMA: CCIL issue: ESMA meets German, French regulators to find way out

Mumbai: The European Securities and Markets Authority (ESMA) held a meeting ‘over the past few days’ with German and French regulators to resolve an oversight impasse involving India’s primary bond clearing house, apparently following London’s lead in protecting the interests of lenders from continental Europe, such as BNP Paribas and Deutsche Bank, that operate in Mumbai’s increasingly globalised and keenly tracked sovereign debt market.

The continuation of a 14-month tussle with the RBI regarding the oversight of Clearing Corp of India (CCIL) will likely put French and German banks at a severe disadvantage relative to other foreign banks operating in India, especially after the UK formally recognised the local bond clearing house.

Sensing this, the Paris-based ESMA and the respective national regulators are working toward finding a solution by February-March, sources aware of the development told ET. “The important point here is the timing of the meeting, which was called by the ESMA themselves, suggesting more urgency than before, when the larger push (toward resolving the issue) was coming from the banks concerned,” said a source aware of the meeting of the regulators in Europe’s richer neighbourhoods.

Emails sent to ESMA, and country regulators BaFIN and AMF, seeking comment on the matter remained unanswered until the publication of this report. European banks that trade in Indian bond and derivatives markets include Societe Generale, Credit Agricole, BNP Paribas and Deutsche Bank. “It was attended by officials from BaFIN (the German Federal Financial Supervisory Authority), the AMF (Autorite des marches financiers of France) and the ACPR (Autorite de Controle Prudentiel et de Resolution) which regulates banking in France,” said the source cited above.

CCIL Curbs
In October 2022, the ESMA de-recognised CCIL, the RBI-supervised clearing body that hosts the platform for trading in domestic government bonds and interest rate derivatives. ESMA’s decision came after the refusal of the RBI to permit rights of audit and inspection over the CCIL National regulators such as the AMF and BaFIN, however, have provided additional time of 18 months until October 2024 for banks from their countries to comply with ESMA’s de-recognition of CCIL.

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