MUMBAI: The RBI and Bank of England signed a memorandum of understanding on Friday, ending uncertainty over UK banks’ ability to continue participating in the Indian bond market.
According to this agreement, the UK regulator will rely on RBI’s supervision to recognise the Clearing Corporation of India as a legitimate counterparty for British banks. The MoU facilitates the exchange of information between the two central banks and establishes a framework for BoEto place reliance on RBI’s regulatory and supervisory activities while ensuring the stability of the UK financial system.The agreement, signed by RBI deputy governorT Rabi Sankar and BoE deputy governor for financial stability Sarah Breeden in London, underscores the significance of cross-border cooperation in facilitating international clearing activities.
Last year, BoE and the European Securities Market Authority (ESMA) had threatened to de-recognise Indian clearing houses unless they subjected themselves to supervision by foreign regulators. The rationale behind this decision was that domestic banks could only use recognised entities for clearing bond trades. To obtain recognition, the Clearing Corporation of India was required to subject itself to foreign supervision.