UK Treasury Grants Equivalence to RBI-Authorized Clearing Houses

June 23, 2023

The United Kingdom Treasury has recently made a significant decision to accord equivalence to central counterparties authorized by the Reserve Bank of India (RBI). This move marks a crucial step in resolving a regulatory tussle between the RBI and overseas authorities.

Resolving a Regulatory Tussle

The decision by the UK Treasury to grant equivalence to RBI-authorized clearing houses represents a significant milestone in addressing the regulatory conflict between the RBI and foreign regulatory bodies. This resolution offers a path forward for cooperation and collaboration in the realm of financial market infrastructures.

Compliance with International Standards

The RBI’s regulatory framework aligns with the Principles on Financial Market Infrastructures (PFMIs). This alignment ensures that the designated central counterparty clearing houses in India adhere to international best practices and standards in their operations.

Effective Date of Equivalence

The regulations granting equivalence to RBI-authorized clearing houses are set to come into effect on June 28. This timeframe allows for a seamless transition and paves the way for enhanced cooperation between Indian entities and their international counterparts.

The Role of Clearing Corporation of India (CCIL)

The CCIL, under the supervision of the RBI, serves as a central counterparty for Indian government bonds and overnight indexed swaps. Its de-recognition by European authorities in October 2022 was due to the RBI’s decision to protect the rights of inspection and audit over the Indian clearing house by overseas regulators.

First CCP Equivalence Decision Post-Brexit

The UK’s equivalence decision in relation to RBI-authorized clearing houses holds particular significance as it is the first decision of its kind made after the UK’s exit from the European Union. This decision highlights the commitment to the India-UK strategic partnership and recognizes the compliance of Indian central counterparties with international best practices.

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