RBI inks MoU with European Securities and Markets Authority (ESMA)

• The Reserve Bank of India (RBI) has inked a Memorandum of Understanding (MoU) with the European Securities and Markets Authority (ESMA).

• This MoU replaces an earlier MoU between RBI and ESMA which was entered into on February 28, 2017.

• The MoU enables RBI and ESMA cooperation and exchange of information in relation to Central Counterparties (CCPs) regulated and supervised by RBI.

• 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 agreement marks a significant step towards restoring access for EU clearing members to Indian central counterparties and follows two years of sustained engagement between ESMA and RBI.

European Securities and Markets Authority (ESMA)

• The European Securities and Markets Authority (ESMA) is the EU’s financial markets regulator and supervisor.

• It is situated in Paris.

• ESMA was founded as a direct result of the recommendations of the 2009 de Larosière report which called for the establishment of a European System of Financial Supervision as a decentralised network. 

• ESMA began operations on January 1, 2011.

• ESMA replaced the Committee of European Securities Regulators (CESR), an advisory body comprised of EU securities regulators that advised the European Commission from 2001 to 2010 on policy issues around securities legislation.

What does ESMA do?

It has three objectives:

i) Investor protection - To make sure that financial consumers’ needs are better served and to strengthen their rights as investors, while also acknowledging their responsibilities

ii) Orderly markets - To promote the integrity, transparency, efficiency and proper functioning of financial markets and robust market infrastructure.

iii) Financial stability - To strengthen the financial system so it can withstand shocks and the unravelling of financial imbalances, and to encourage economic growth.

• ESMA is also responsible for coordinating measures taken by securities supervisors or adopting emergency measures when a crisis situation arises.

• Whilst ESMA is an independent Authority, it is accountable to the European institutions including the European Parliament, where it appears before the Economic and Monetary Affairs Committee (ECON) at their request for formal hearings, the Council of the European Union and European Commission.