India comes in from the cold

A scant six days before the submission window closes, the Reserve Bank of India has confirmed that it will allow its country’s CCP’s to apply for ESMA approval. Once the initial application is made, the CCP’s are then granted up to 30 business days to finalise their application; ESMA then has 180 working days to grant or deny. An ESMA spokesman said that “interested non-EU entities are currently applying” but could not clarify exactly which interested entities. The likely effect of the RBI authorisation is at least a seven month reprieve for those EU banks which are members of CCIL. Although it is unclear whether EMIR sanctions would apply to the unapproved CCP or the EU bank that transacts through it; absent ESMA approval, in practical terms EU banks would have been forced to transfer affected positions to US/domestic clearing brokers or liquidate positions entirely. Even if an EU bank were to escape EU sanction, trades via a non-QCCP will attract an up to 48% increase in CRR risk weighting. Although Asia forms a small part of most EU banks global books and Indian trade a fraction of that, lack of RBI approval would have constituted a large chink in EMIR’s extra-territorial armour. In a similar vein, and as widely expected, a spokesman for the Korea Exchange’s clearing house confirmed that it would apply to ESMA by 11^th September.