The EU’s Financial Regulator Has Revoked The Accreditation Of 6 Indian Clearing Houses

The EU’s Financial Regulator Has Revoked The Accreditation Of 6 Indian Clearing Houses

November, 5, 2022: The EU’s decision to de-recognise the Indian clearing house comes amid a standoff between Indian and foreign regulators.

SEBI and RBI do not want Indian entities to come under the scrutiny of foreign regulators as they believe it is a jurisdictional issue.

The European Securities and Markets Authority (ESMA), the financial markets regulator of the European Union (EU), has de-recognised six Indian Central Counterparties (CCPs) in accordance with the European Market Infrastructure Regulation (EMIR).

The EU’s decision to de-accredit the Indian clearing house comes amid a standoff between Indian and foreign regulators, bankers told the Economic Times.

SEBI and RBI do not want Indian entities to come under the scrutiny of foreign regulators as they believe it is a jurisdictional issue.

“After its assessment, ESMA established that all cumulative conditions under EMIR for the recognition of these six TC-CCPs are not met, as no cooperation arrangements (in line with Article 25(7) of EMIR) have been made between ESMA.

Each of the relevant Indian authorities, namely RBI, SEBI and IFSCA. Therefore, the condition under point (c) of Article 25(2) of EMIR is not met.

Consequently, ESMA concludes that the EMIR regime currently applicable to these TC-CCPs cannot continue to be recognized in the European Union under,” according to the ESMA statement.

From the date of application of the withdrawal decisions, these TC-CCPs will no longer be able to provide services to clearing members and trading venues established in the EU.

In order to minimize adverse effects on EU market participants, ESMA will postpone the application of withdrawal decisions until April 30, 2023.

The decision will affect European banks in India as they will either need 50 times more capital to carry out trades involving Indian central counterparties or unwind positions with central counterparties in the next 6 to 9 months.

All European banks operating as branches of their parent institutions in Europe must comply with the regulators of their respective home countries.

EU-based Deutsche, BNP, Crédit Agricole and Societe Generale must comply with ESMA rules, but other lenders such as HSBC, Standard Chartered and Barclays must meet standards set by the Bank of England.

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