Banks' exposure to a qualifying clearing house would be kept outside the limit of 15 per cent of their capital funds applicable to a single counterparty, the Reserve Bank said today.
"...As an interim measure, a bank's clearing exposure to a Qualifying Central Counterparty (QCCP) will be kept outside of the exposure ceiling of 15 per cent of its capital funds applicable to a single counterparty," the RBI said in a notification.
The exposure limit applicable to a single borrower or counterparty is 15 per cent of the capital funds of the bank.
QCCP is a licensed clearing house, technically known as Central Counterparty (CCP) that acts as a facilitator between counterparties for contracts traded in one or more financial markets.
Clearing exposure would include trade exposure and default fund exposure, RBI said.
Other exposures to QCCPs such as loans, credit lines, investments in the capital of CCP, liquidity facilities, will continue to be within the existing exposure ceiling of 15 per cent of capital funds to a single counterparty, it added further.
"However, all exposures of a bank to a non-QCCP should be within this exposure ceiling of 15 per cent," it clarified.
Further RBI said, in case the status of qualifying clearing house is changed, it would be considered a non-QCCP and the exposure norms would be as applicable to non-QCCPs.
Clearing Corporation of India (CCIL), National Securities Clearing Corporation (NSCCL), Indian Clearing Corporation (ICCL), and MCX-SX Clearing Corporation (MCX-SXCCL) are four QCCPs in the country.
CCIL has been granted the status of a QCCP by RBI, the other three CCPs have been granted the status of QCCP by SEBI.
QCCPs are subjected to rules and regulations consistent with principles for Financial Market Infrastructures (PFMIs) issued by the Committee on Payment and Settlement Systems (CPSS) and International Organisation of Securities Commissions (IOSCO).
The international standards were issued in April 2012 and all G-20 nations were to required to adhere to these strict standards to check derivative-related risks in the financial system.
These rules were issued to enhance safety and efficiency in payment, clearing, settlement, and recording arrangements, and more broadly, to limit systemic risk and foster transparency and financial stability.
RBI further said that it would consider a revised framework on banks' exposure to QCCP as and when the Basel Committee on Banking Supervision (BCBS) finalises its proposal in this regard.
