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regular-article-logo Thursday, 22 February 2024

Reserve Bank of India signs agreement with Bank of England on bond trade clearance

Under the new agreement, the Bank of England (BoE) will assess and recognise Clearing Corporation of India (CCIL) as a counterparty to clear and settle bonds and overnight indexed swap trades done by England-based banks and investors

Our Bureau And Agencies Mumbai Published 02.12.23, 11:44 AM
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The central banks of India and England on Friday signed an agreement on information exchange for the settlement of bond trades, the Reserve Bank of India (RBI) said.

In India, bonds are settled through the Clearing Corporation of India (CCIL).

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Under the new agreement, the Bank of England (BoE) will assess and recognise CCIL as a counterparty to clear and settle bonds and overnight indexed swap trades done by England-based banks and investors.

The two central banks have also established a framework for the BoE to rely on the Indian central bank's regulatory and supervisory activities while safeguarding the United Kingdom's financial stability, the RBI said.

In October last year, the European Securities and Markets Authority had withdrawn recognition of six Indian clearing counterparties, including CCIL, effective from April.

This meant that European banks had to settle their India-based trades through banks based in other jurisdictions.

Subsequently, CCIL also required a fresh application for BoE's recognition.

The differences arose on account of the European Market Infrastructure Regulation (EMIR) which was brought in after the 2008 financial crisis. India was hesitant to sign a revised agreement as it said that clearing houses here could even be inspected and audited by the ESMA. The RBI felt that such a condition was intruding on its regulatory and supervisory turf. CCIL is supervised by the RBI.

The statement further said that the MoU confirms the interests of both authorities in enhancing cooperation in line with their respective laws and regulations.

The MoU was signed by RBI deputy governor T. Rabi Sankar and BoE deputy governor for financial stability Sarah Breeden in London.

Meanwhile, foreign inflows into Indian government bonds hit the highest level in six years in November ahead of the securities being included in JPMorgan's emerging market index next year, with investors and treasury officials expecting buying to continue.

Foreign portfolio investors bought a net Rs 12,720 crore ($1.53 billion) of bonds in November, the highest since June 2017, data from Clearing Corp of India showed.

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