RBI and EU Regulator ESMA Forge New Cooperation Agreement on Central Counterparties
The Reserve Bank of India (RBI) and the European Securities and Markets Authority (ESMA), the European Union's primary financial markets regulator, have officially signed a memorandum of understanding (MoU) that establishes a formal framework for information sharing and cooperation regarding central counterparties (CCPs). This landmark agreement, announced on January 27, 2026, represents a significant breakthrough in cross-border financial regulation and marks the resolution of a prolonged dispute between Indian authorities and European regulators.
Resolving Longstanding Regulatory Disputes
This new MoU effectively resolves the long-pending dispute between India and ESMA concerning the supervision and recognition of domestic Indian central counterparties, most notably the Clearing Corporation of India Ltd (CCIL). The timing of this agreement is particularly noteworthy as it coincides with India and the European Union announcing the conclusion of negotiations on their landmark Free Trade Agreement (FTA), creating a comprehensive framework for enhanced economic cooperation between the two major economic powers.
Immediate Benefits for European Financial Institutions
With this agreement now in place, European banks operating in India can resume comfortable clearing and settlement of their clients' transactions through the CCIL platform. This development is especially significant for major European financial institutions with substantial Indian operations, including:
- Societe Generale
- Deutsche Bank
- BNP Paribas
These institutions had faced operational challenges since ESMA's withdrawal of recognition for Indian CCPs in October 2022, making this new agreement particularly timely and beneficial for their Indian operations.
Regulatory Framework and Cooperation Mechanisms
According to the official RBI release, "The MoU enables RBI and ESMA to cooperate regarding CCPs, in line with their respective laws and regulations. The MoU establishes a framework for ESMA to place reliance on RBI's regulatory and supervisory activities while safeguarding the European Union's financial stability." This carefully structured arrangement ensures that both regulatory bodies maintain their jurisdictional authority while creating mechanisms for mutual recognition and information exchange.
The agreement replaces an earlier MoU between RBI and ESMA that was originally entered into on February 28, 2017, reflecting the evolving nature of international financial regulation and the need for updated cooperation frameworks.
ESMA's Perspective and Regulatory Requirements
In a separate statement, ESMA emphasized that this agreement represents a significant step toward restoring access for EU clearing members to Indian central counterparties. The European regulator noted that the MoU follows two years of sustained engagement between ESMA and RBI and fulfills a key requirement under Article 25 of the European Market Infrastructure Regulation (EMIR) for the recognition of third-country CCPs.
ESMA specifically highlighted that "The MoU is a key requirement under Article 25 of the European Market Infrastructure Regulation (EMIR) for the recognition by ESMA of third-country CCPs. It allows the Clearing Corporation of India Ltd (CCIL), a CCP established in India and supervised by RBI, to re-apply for recognition under EMIR."
Background: The 2022 Derecognition and Its Resolution
The significance of this new agreement becomes clearer when considering the historical context. In October 2022, ESMA withdrew recognition of six Indian third-country central counterparties under the EMIR regime due to insufficient cooperation arrangements between European and Indian regulators. The affected entities included:
- Clearing Corporation of India Ltd (CCIL)
- The Indian Clearing Corporation Ltd (ICCL)
- NSE Clearing Ltd (NSCCL)
- Multi Commodity Exchange Clearing (MCXCCL)
- India International Clearing Corporation (IFSC) Ltd (IICC)
- NSE IFSC Clearing Corporation Ltd (NICCL)
This derecognition occurred specifically because of "no cooperation arrangements" between ESMA and Indian regulatory bodies, including the RBI, the Securities and Exchange Board of India (SEBI), and the International Financial Services Centres Authority (IFSCA). While ICCL, NSCCL, and MCXCCL fall under SEBI's supervision, IICC and NICCL are regulated by IFSCA.
Future Regulatory Cooperation Prospects
ESMA has indicated that discussions continue with SEBI and IFSCA to establish similar cooperation arrangements, suggesting that this RBI-ESMA agreement may serve as a template for broader regulatory cooperation between European and Indian financial authorities. The European regulator emphasized that this MoU reflects ESMA's strong commitment to international supervisory cooperation and mutual support to advance safe, resilient, and open financial markets.
This development demonstrates the growing importance of cross-border regulatory cooperation in facilitating international clearing activities and maintaining global financial stability. As financial markets become increasingly interconnected, such agreements between major economic powers become essential for smooth international financial operations and investor confidence.
