No significant impact of Esma ban, say domestic clearing corporations

Domestic clearing corporations (CCs) don’t expect any significant impact due to the de-recognition by the European Securities and Markets Authority (ESMA), which has come into effect from April 30. 

The financial regulator for the European Union (EU) has withdrawn the third-country central counterparties (CCPs) recognition of six Indian clearing corporations -- namely Clearing Corporation of India (CCIL), Indian Clearing Corporation, NSE Clearing, India International Clearing Corporation (IFSC), NSE IFSC Clearing Corporation and Multi Commodity Exchange Clearing Corporation.

Industry sources said that as of Tuesday, the European banks continued to use the clearing and settlement services of the CCIL.

“There is not going to be any significant impact as most of the European banks will route their investments through their entities based in the United States. Further, banks in France, Germany and Britain will continue with the Indian clearing corporations for an extended period,” said an industry official.  

In February, the national regulators for French and German banks had announced an additional time of 18 months, till October 2024, for French and German banks to comply with ESMA’s decision and terminate the membership of CCIL.

ESMA’s decision first came in its board of supervisors’ meeting held in October 2022. 

According to ESMA, European banks will be penalised for dealing with non-recognised Indian clearing corporations.