ESMA Reaches Out To German & French Regulators For Solutions
The European Securities and Markets Authority (ESMA) recently held a meeting with regulators from Germany and France to resolve an issue regarding India's primary bond clearing house.
This comes after London took action to protect the interests of lenders from continental Europe, including BNP Paribas and Deutsche Bank, that operate in Mumbai's sovereign debt market.
The conflict with the Reserve Bank of India (RBI) over the oversight of Clearing Corp of India (CCIL) has been ongoing for 14 months. If it continues, French and German banks may be at a disadvantage compared to other foreign banks operating in India. This is especially true after the UK officially recognised the local bond clearing house.
According to sources familiar with the matter, the European Securities and Markets Authority (ESMA) in Paris and national regulators are collaborating to find a solution to a problem by February or March.
This development suggests a sense of urgency, as ESMA itself called for the meeting, whereas previously, the banks involved were the driving force behind resolving the issue. The regulators are meeting in the wealthier areas of Europe.
Despite sending emails to ESMA and country regulators BaFIN and AMF seeking comment on the matter, there was no response until the publication of this report. European banks such as Societe Generale, Credit Agricole, BNP Paribas, and Deutsche Bank, which trade in Indian bond and derivatives markets, were involved.
According to the source cited above, officials from BaFIN (the German Federal Financial Supervisory Authority), the AMF (Autorité des marchés financiers of France), and the ACPR (Autorité de Contrôle Prudentiel et de Résolution) regulating banking in France attended the event.
In October 2022, ESMA withdrew its recognition of CCIL, which is a clearing body supervised by the RBI.
CCIL hosts the platform for trading in domestic government bonds and interest rate derivatives. ESMA's decision was made because the RBI refused to allow rights of audit and inspection over the CCIL.
However, national regulators such as the AMF and BaFIN have given banks from their countries an additional 18 months, until October 2024, to comply with ESMA's de-recognition of CCIL.
