Breaking Ground: RBI and Bank of England Forge Partnership in CCIL

In a significant stride towards financial collaboration, the Reserve Bank of India (RBI) and the Bank of England (BoE) have inked a Memorandum of Understanding (MoU) focused on cooperation and information exchange related to the Clearing Corporation of India Ltd (CCIL).

What is CCIL?:

CCIL serves as a central counterparty (CCP), playing a pivotal role in providing clearing and settlement services for transactions in government securities, foreign exchange, and money markets within India. Regulated by the RBI, CCIL ensures the smooth functioning of these critical financial processes.

Cross-Border Collaboration: A Key Element

The MoU not only lays down a structured framework for BoE to rely on RBI's regulatory and supervisory activities but also underscores the significance of cross-border cooperation. This collaboration aims to facilitate international clearing activities, emphasizing BoE's commitment to acknowledging and respecting regulatory regimes of other nations.

ESMA's Decision and RBI's Response:

This development follows the European Securities and Markets Authority's (ESMA) decision last October to withdraw recognition of several Indian CCPs, including CCIL. The RBI's stance was rooted in its confidence in the robust risk management practices of domestic CCPs, asserting that foreign regulators' inspections were unnecessary.

Global Recognition for CCIL:

CCIL, recognizing the global landscape, applied to the Bank of England for recognition as a third country Central Counterparty (TC-CCP) in January. The MoU acts as a pivotal step, allowing BoE to assess CCIL's application and reinforcing cooperative efforts in accordance with regulatory frameworks.

Digital Transformation of Financial Markets:

As the financial world evolves, such collaborations become imperative for maintaining the integrity and efficiency of clearing and settlement processes. This partnership not only signifies trust in India's regulatory strength but also aligns with the growing need for global cooperation in the rapidly transforming financial landscape.

Empowering UK-Based Lenders This agreement brings relief to UK-based lenders, such as Barclays and Standard Chartered, enabling them to continue providing clearing and settlement facilities to clients in India. It underlines the resilience and adaptability of market infrastructures to foster seamless financial transactions.

Signing of the MoU:

The MoU, signed by RBI Deputy Governor T Rabi Sankar and BoE Deputy Governor for Financial Stability Sarah Breeden in London, marks a new chapter in international financial cooperation. It reflects the commitment of both authorities to navigate the evolving financial terrain collaboratively.