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ESMA row: EU banks likely to turn Indian entities into subsidiaries

ESMA's decision followed the Reserve Bank of India's refusal to grant the European regulator supervisory powers over the Indian CCPs

Asit Ranjan Mishra New Delhi

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3 min read Last Updated : Apr 30 2023 | 11:09 PM IST

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In order to circumvent the derecognition, from Sunday, of Indian central counterparties (CCPs) by the European Securities and Markets Authority (ESMA), European banks may explore the option of turning their Indian entities into subsidiaries.

On October 31 last year, ESMA, the European financial market regulator, withdrew recognition granted to six Indian clearing corporations that host the trading platform for government bonds and overnight indexed swaps but deferred implementation to April 30.

“One option for German banks would be to subsidarise entities in India and make them legally distinct from EU (European Union) entities. Alternatively, they could clear as clients of non-EU clearing members,” an official of German regulator BaFin said. However, the official said till a permanent solution was found, alternative mechanisms to operate in India must be examined by the banks themselves and not by BaFin.