The Reserve Bank of India inked a memorandum of understanding with the Bank of England on Friday, highlighting their cooperation in abiding by their respective laws and regulations in clearing international settlements, the central bank said in a press release.
In October 2022, the European Securities and Markets Authority announced that it was derecognising six Indian clearing houses, including the Clearing Corp. of India Ltd., with effect from April 30. Clearing Corp., which is a key platform for the settlement of trades, is regulated by the RBI.
This came as the ESMA insisted on auditing and inspecting India's clearing corporations. This was considered an overreach into the RBI's jurisdiction.
Therefore, the MoU is aimed at enabling the Bank of England to assess the application of Clearing Corp. for recognition as a third-country central counterparty. This is a requirement for U.K.-based banks to clear transactions through Clearing Corp., the RBI said.
"The MoU establishes a framework for the Bank of England to place reliance on the RBI's regulatory and supervisory activities while safeguarding U.K. financial stability," the RBI said in the release.
The MoU was signed by RBI's Deputy Governor T Rabi Shankar and Bank of England counterpart Sarah Breeden in London on Friday.
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