RBI/2018-19/60
DPSS.CO.OD No.803/06.08.005/2018-2019
October
15, 2018
Central Counterparties
authorised by RBI /
Central Counterparties seeking authorisation from RBI /
Foreign Central Counterparties seeking recognition from RBI
Madam / Dear Sir,
Directions for Central
Counterparties (CCPs)
Please refer to the announcement
made in the Second Bi-monthly Monetary Policy
Review dated June 06, 2018 regarding issuance of directions
relating to capital requirements and governance framework of Central
Counterparties (CCPs) as also providing a framework for recognition of
foreign CCPs.
2. Accordingly, the directions
governing the functioning of CCPs are given in the Annex to this circular for compliance. The
CCPs shall continue to ensure compliance with the Principles for Financial
Market Infrastructures (PFMI).
3. These directions are issued
under Section 18 read with Section 10(2) of the Payment and Settlement
Systems Act, 2007 (Act 51 of 2007) and shall come into force with effect
from the date of these directions.
Yours faithfully
(P. Vasudevan)
Chief General Manager
Encl.: As above
Annex
Directions
for Central Counterparties (CCPs)
(DPSS.CO.OD.No.803/06.08.005/2018-19 dated October 15, 2018)
1. Applicability
The provisions of these
directions shall apply to a domestic central counterparty authorised to
operate in India under Payment and Settlement Systems Act, 2007 (Act 51 of
2007) and foreign CCPs recognised by the Reserve Bank of India (RBI) under
Payment and Settlement Systems Act, 2007 for their operations including
clearing and settlement in India.
2. Definitions
The key definitions used in
these directions are as follows:
a.
"Act"
means the Payment and Settlement Systems Act, 2007 (Act 51 of 2007).
b.
"Authorised
Central Counterparty" means a CCP to whom Certificate of Authorisation
is issued by RBI under sub-section 1 of Section 7 of the Act.
c.
“Company”
shall mean a company as defined in Section 2 (20) of the Companies Act,
2013.
d.
“Control”
shall include the right to appoint majority of the directors or to control
the management or policy decisions exercisable by a person or persons
acting individually or in concert, directly or indirectly, including by
virtue of their shareholding or management rights or shareholders
agreements or voting agreements or in any other manner.
e.
“Central
Counterparty” (CCP) means a system provider, who by way of novation
interposes between system participants in the transactions admitted for
settlement, thereby becoming the buyer to every seller and the seller to
every buyer, for the purpose of effecting settlement of their transactions.
f.
“Board”
means the Board of Directors of the authorised CCP.
g.
“Domestic
Central Counterparty” means a CCP incorporated in India and authorised by
RBI under the Act.
h.
“Foreign
Central Counterparty” means a CCP incorporated outside India.
i.
“Recognised
Central Counterparty” means a foreign CCP that is authorised by RBI under
the Act for carrying out its operations as a CCP in India.
j.
“Non-Executive
Director” means a Director other than a whole-time Director.
k.
‘‘Senior
management’’ means personnel of the company who are members of its core
management team, excluding Board of Directors, comprising all such persons
one level below the Executive Directors, including the functional heads.
l.
“User”
means a regulated entity admitted as a member of the CCP in terms of its
Bye Laws, Rules and Regulations for the purpose of clearing and settlement
of its trades concluded in the ordinary course of business.
m.
“Facilitator”
means an entity other than a ‘user’ admitted as a member of the CCP in
terms of its Bye Laws, Rules and Regulations.
n.
Words
and expressions used and not defined in these directions but defined in the
Act or Companies Act, 2013 and Rules shall have the meanings respectively
assigned to them in those Acts.
Section
A
Directions on Governance of domestic CCPs authorised to operate in India by
the RBI
Governance provides the
processes through which an organization sets its objectives, determines the
means for achieving the objectives, and monitors performance against the
objectives. The broad principles underlying governance of domestic CCPs are
prescribed hereunder.
1. Composition of the Board
(1) The Board of every
authorised CCP shall include:
a.
Nominee
Directors;
b.
Independent
Directors;
c.
Managing
Director; and,
d.
such
other Directors as may be notified by RBI from time to time.
(2) The Board shall have the
minimum number of directors as specified in the Companies Act, 2013.
(3) “Independent Director” shall
have the same meaning as assigned under section 149 (6) of the Companies
Act, 2013.
(4) “Nominee Director” means a
Director nominated by
a.
any
shareholder in pursuance of Articles of Association of the CCP or
b.
any
financial institution in pursuance of the provisions of any law for the
time being in force, or of any agreement.
(5) The Managing Director shall
be an ex-officio Director on the Board and shall not be included in either
the category of Independent Directors or Nominee Directors.
(6) The number of Independent
Directors, on the Board and the Committees of the CCP, should be at least
equal to the number of Nominee Directors (including the Managing Director)
and in case of an equality of votes, the Chairperson of the Board /
Committee (who is an Independent Director), shall have a second or casting
vote.
(7) No foreign institutional
investor shall have any representation in the Board of the authorised CCP.
(8) At least one Independent
Director shall be present in the meetings of the Board to constitute the
quorum. The quorum for a meeting of the Board of Directors of the CCP shall
be one third of its total strength or two Directors, whichever is higher.
2. Roles and responsibilities of
the Board
(1) The roles and
responsibilities of the Board of an authorised CCP shall include:
a.
establishing
clear strategic aims for the CCP;
b.
ensuring
effective monitoring of senior management;
c.
establishing
and overseeing the risk-management function and material risk decisions;
d.
overseeing
internal control functions (including ensuring independence and adequate
resources);
e.
ensuring
compliance with all supervisory and oversight requirements;
f.
establishing
appropriate compensation policies;
g.
ensuring
consideration of financial stability and other relevant public interests;
h.
providing
accountability to the owners, participants, and other relevant
stakeholders;
i.
ensuring
fair and transparent conduct of the CCP.
3. Conditions of appointment of
Directors
(1) The appointment of all the
Directors shall be made by the Board of the CCP on the recommendation of
its Nomination and Remuneration Committee of Directors on the basis of the
“fit and proper” criteria as prescribed hereunder.
(2) The Directors nominated by
the nominating organisation shall be serving officials with relevant
experience and expertise.
(3) The manner of appointment of
Directors, Managing Director and Chairperson shall be in terms of the
Articles of Association of the authorised CCP, Companies Act, 2013 and / or
rules or regulations thereunder.
4. Appointment of Chairperson
(1) The Chairperson shall be a
citizen of India.
(2) The term of the Chairperson
shall not be beyond three years. The term of the Chairperson may be
extended by another term, subject to satisfactory performance review and
approval of RBI.
(3) The maximum permissible age
for appointment / continuation as Non-executive Chairperson shall be 65
years.
(4) Subject to prior approval of
RBI, the Chairperson shall be elected by the Board from amongst the
Independent Directors. The CCP shall forward to the RBI name/s of the candidate/s
who have offered to function as Chairperson after ensuring that the
candidate/s is / are suitable for the post based on qualification,
expertise, track record and integrity. The name/s should be accompanied by
the information in the format prescribed at Appendix
1 on “fit and proper” criteria.
(5) RBI would scrutinise the
application to determine the suitability of the person for appointment
based on “fit and proper” criteria and thereafter, communicate its approval
or otherwise to CCP.
(6) The above process should be
followed at the time of appointment / reappointment and only thereafter
placed in the meeting of the Annual General Body of the CCP.
5. Appointment of Director /
Independent Director / Nominee Director
(1) The Director / Independent /
Nominee Director shall be a citizen of India.
(2) The Director / Independent
Director / Nominee Director shall be appointed for a maximum of two terms
of three years each or up to 65 years of age, whichever is earlier.
However, the Directors serving on the Board of the CCP, as on date of
issuance of these directions, may continue to hold office till the expiry
of their term.
(3) The first term of the
Director / Independent Director / Nominee Director may be extended by
another term, subject to a satisfactory performance review and approval of
RBI.
(4) A cooling-off period of
three years shall be applicable before a Nominee Director becomes eligible
for being appointed as Independent Director and vice versa.
(5) The Director should possess
domain expertise in fields relevant to the operation of CCP.
(6) Authorised CCP shall inform
RBI about the appointment / reappointment of the Directors and shall send
to RBI within 15 calendar days from the date of appointment by the Board,
the Directors’ profile, declaration on “fit and proper” criteria submitted
by Directors as prescribed and their consent to act as Directors.
(7) The authorised CCP shall
disclose to RBI in the format specified within fifteen calendar days from
the end of the financial year, the change in the Board.
6. Appointment of Managing
Director
(1) The Managing Director shall
be a citizen of India.
(2) The Managing Director shall
fulfil the criteria as prescribed under the Companies Act, 2013 and as per
the directions if any issued in this regard by RBI under the Act, as
amended from time to time.
(3) The term of the Managing
Director shall not be beyond five years. The term of the Managing Director
may be extended by another term or up to 65 years of age, whichever is
earlier, subject to satisfactory performance review and approval of RBI.
However, the Managing Director of the CCP, as on date of issuance of these
directions, may continue to hold office till the expiry of his / her term.
(4) In case of renewal, the
appointment process for Managing Director shall be conducted afresh.
(5) The appointment, renewal of
appointment and termination of service of the Managing Director of an
authorised CCP shall require the prior approval of RBI.
(6) The process to be followed
for appointment of Managing Director by the CCP is as under:
a.
The
Board of CCP should put in place a procedure for selecting the Managing
Director and it may constitute a Committee (by whichever name called), for
the same.
b.
It
should undertake a process of due diligence to determine the suitability of
the person/s for appointment based upon qualification, expertise, track
record, integrity and other ”fit and proper” criteria (as detailed in Appendix 1).
c.
CCP
shall forward the name of the shortlisted candidate along with the
curriculum vitae and declaration to RBI for prior approval.
(7) RBI would scrutinise the
application to determine the suitability of the person for appointment
based on “fit and proper” criteria and thereafter, communicate its approval
or otherwise to the CCP.
(8) The process for appointment
of the successor for the position should be initiated well in advance so
that the identification / recruitment is completed well before the
completion of the term of the current incumbent.
7. Appointment of senior
management
(1) The appointment and
remuneration of personnel in senior management shall be as decided by the
Nomination and Remuneration Committee of the authorised CCP.
(2) The responsibilities of the
senior management personnel shall include:
a.
ensuring
consistency of authorised CCP’s activities with the objectives and strategies
determined by the Board;
b.
designing
and establishing compliance and internal control procedures promoting the
objectives of the authorised CCP;
c.
regularly
reviewing and testing internal control procedures;
d.
ensuring
that sufficient resources are devoted to risk management and compliance;
e.
the
risk control process; and
f.
ensuring
that risks posed to the authorised CCP by its clearing and related
activities are addressed.
(3) The CCP shall disclose the
ratio of compensation paid to them vis-a-vis median of compensation paid to
all employees of the CCP.
8. Fit and proper criteria for
Directors
A Director shall be deemed to be
a “fit and proper” person if:
(1) such person has a record of
fairness and integrity, including but not limited to —
a.
financial
integrity;
b.
good
reputation and character; and
c.
honesty;
(2) such person has not incurred
any of the following disqualifications —
a.
convicted
by a court for any offence involving moral turpitude or any economic
offence or any offence under the laws administered by the RBI;
b.
declared
insolvent and not discharged;
c.
an
order, restraining, prohibiting or debarring the person from accessing /
dealing in any financial system, passed by any regulatory authority, and
the period specified in the order has not elapsed;
d.
found
to be of unsound mind by a court of competent jurisdiction and the finding
is in force; and
e.
is
financially not sound.
(3) If any question arises as to
whether a person is a fit and proper person, the RBI’s decision on such
question shall be final.
9. Committees of the Board
(1) Nomination and Remuneration
Committee
(1) Authorised CCP shall
constitute a Nomination and Remuneration Committee consisting of three or
more non-executive Directors out of which majority shall be Independent
Directors. Provided, the Chairperson of the CCP can be a member of the
Nomination and Remuneration Committee but shall not chair such Committee.
(2) The Nomination and
Remuneration Committee shall identify persons who are qualified to become
Directors and who can be appointed in senior management in accordance with
the criteria laid down, recommend to the Board their appointment and shall
carry out evaluation of performance of every Director and recommend their
removal if required.
(3) The Nomination and
Remuneration Committee shall formulate the criteria for determining
qualifications, positive attributes and independence of a Director and
recommend to the Board a policy relating to the remuneration for the
Directors, Managing Director and senior management. The policy must be
overseen and reviewed at least annually by the Committee.
(4) The Nomination and
Remuneration Committee shall, while formulating the policy ensure that—
a.
the
level and composition of remuneration is reasonable and sufficient to
attract, retain and motivate directors of the quality required to run the
CCP successfully;
b.
relationship
of remuneration to performance is clear and meets appropriate performance
benchmarks; and
c.
remuneration
to the Managing Director and senior management personnel involves a balance
between fixed and incentive pay reflecting short and long-term performance
objectives appropriate to the working of the CCP and its goals.
(2) Risk Management Committee
(1) Every authorised CCP shall
constitute a Risk Management Committee of the Board which shall be chaired
by an Independent Director, who is sufficiently knowledgeable in the field
of risk management.
(2) The Committee can invite
senior officials and external independent experts to attend its meeting.
(3) The Risk Management
Committee shall formulate a detailed risk management policy which shall be
approved by the Board. The Committee shall review the risk management
policy annually.
(4) The head of the risk
management department shall be responsible for implementation of the risk
management policy and he / she shall have an additional reporting line to
the Chairperson of Risk Management Committee.
(5) The Risk Management
Committee shall monitor implementation of the risk management policy and
keep the Board informed about its implementation and deviation, if any.
(6) The Risk Management
Committee shall advise the Board on any arrangements that may impact the
risk management of the authorised CCP, such as significant change in risk
model, the default procedures, the criteria for accepting members, new
classes of instruments, or the outsourcing of functions.
(3) Audit Committee
(1) The Audit Committee of an
authorised CCP shall consist of a minimum of three Directors with
Independent Directors forming a majority. Provided that majority of members
of Audit Committee including its Chairperson shall be persons with ability
to read and understand, the financial statements.
(2) Every Audit Committee shall
act in accordance with the terms of reference specified in writing by the
Board which shall, inter alia, include -
a.
the
recommendation for appointment, remuneration and terms of appointment of
auditors of the CCP;
b.
review
and monitor the auditor’s independence and performance, and effectiveness
of audit process;
c.
examination
of the financial statements and the auditors’ report thereon;
d.
approval
or any subsequent modification of transactions of the CCP with related
parties;
e.
scrutiny
of inter-corporate loans and investments;
f.
valuation
of undertakings or assets of the CCP, wherever it is necessary;
g.
evaluation
of internal financial controls and audit reports of risk management
systems;
h.
monitoring
the end use of funds raised through public offers and related matters;
i.
such
other matters as may be specified under Companies Act, 2013 or the Act or
rules / regulations thereunder.
(3) The Audit Committee may call
for the comments of the auditors about internal control systems, the scope
of audit, including the observations of the auditors and review of
financial statements before their submission to the Board and may also
discuss any related issues with the internal and statutory auditors and the
management of the CCP.
(4) The Audit Committee shall
have authority to investigate into any matter in relation to the items
specified in sub-section (2) or referred to it by the Board and for this
purpose shall have power to obtain professional advice from external
sources and have full access to information contained in the records of the
CCP.
(5) The auditors of a CCP and
senior management personnel shall have a right to be heard in the meetings
of the Audit Committee when it considers the auditors’ report but shall not
have the right to vote.
(6) The authorised CCP shall
appoint internal auditor and statutory auditor in accordance with the
requirements under the Companies Act, 2013 and such other auditors as may
be specified by RBI from time to time under the Act and the rules or
regulations thereunder.
(7) The authorised CCP shall
constitute such other Committees as may be prescribed under the Companies
Act, 2013 or specified by RBI under the Act or rules or regulations
thereunder.
(4) Technical Committee
(1) Every authorised CCP shall
constitute a Technical Committee of the Board which shall be chaired by an
Independent Director, who is sufficiently knowledgeable in the field of
Information Technology.
(2) The Committee may invite
senior officials and external independent experts to attend its meeting.
(3) The Technical Committee
shall formulate a detailed Information Technology policy which shall be
approved by the Board. The Committee shall review the policy annually.
(4) The Technical Committee
shall act in accordance with the terms of reference specified in writing by
the Board which shall, inter alia, include but is not limited to -
a.
Advise
on IT policies / approaches to be adopted;
b.
Key IT
decisions that are critical for the CCPs business;
c.
Oversee
the IT related resources, systems and infrastructure;
d.
Review
the business continuity management processes and disaster recovery drills
that are undertaken periodically.
(5) Regulatory Compliance
Committee
(1) Every authorised CCP shall
constitute a Regulatory Compliance Committee of the Board which shall be
chaired by an Independent Director.
(2) The Regulatory Compliance
Committee shall act in accordance with the terms of reference specified in
writing by the Board which shall, inter alia, include but is not limited to
–
(a) Review the compliance to
directions issued by the Regulator
(b) Monitor the compliance of
inspection recommendations.
10. Compliance Officer
(1) The authorised CCP shall
designate a Compliance Officer.
(2) The Compliance Officer shall
be responsible for monitoring the compliance of the Act and rules or
regulations thereunder, as also the guidelines issued by other regulatory
bodies, and other Acts, as applicable.
(3) The Compliance Officer
shall:
a.
administer
the compliance policies and procedures established by the Board and report
the status to the Regulatory Compliance Committee;
b.
establish
procedures for the effective remediation of instances of non-compliance;
c.
ensure
that the relevant persons involved in the compliance function are not
involved in the performance of the services or activities they monitor and
that any conflicts of interest of such persons are properly identified and
eliminated.
11. Disclosure
The authorised CCP shall ensure
timely and accurate disclosure to RBI on all material matters including the
financial position, rights and obligations of users, performance,
ownership, and governance as specified by RBI from time to time.
12. Conflict of interest
(1) Authorised CCP must maintain
effective written organisational and administrative arrangements to
identify and manage potential conflicts of interest between (i) itself,
including its management, employees, close associates, holding, subsidiary
or associate companies and (ii) its members.
(2) An authorised CCP shall have
an internal manual covering the management of conflicts between its
commercial and regulatory functions. Further, the entire conflict management
framework shall be reviewed periodically and be strengthened based on the
observations of such review.
(3) The Independent Directors
shall identify important issues which may involve conflicts of interest for
the authorised CCP that may have significant impact on the functioning of
authorised CCP or may not be in the interest of its market segments. The
same shall be reported to RBI.
Section
B
Directions on Networth requirements and Ownership of CCPs
CCPs should have sufficient
networth to cover potential general business losses and continue to provide
services as a going concern. The specific requirements on networth for CCPs
authorised / recognised by the Reserve Bank are laid down hereunder.
1. Networth of CCP
(1) Every applicant seeking
authorisation / recognition as a CCP under Section 5 of the Act, shall have
a minimum networth1 of Rs.3 billion at the
time of submitting its application.
(2) The adequacy of networth
requirement of the CCP would be reviewed by RBI from time to time. RBI may,
however, based on its assessment of the CCP prescribe higher networth.
(3) An authorised CCP shall not
distribute profits in any manner to its shareholders until the networth
specified under sub-paras (1) and (2) above, as the case may be, is
achieved.
(4) Every authorised CCP shall
submit an audited networth certificate as at close of financial year from
the statutory auditor within six months of the closure of the financial
year. The networth is required to be computed as per the instructions
issued by the RBI.
(5) A CCP shall hold liquid net
assets2 funded by equity capital
equal to minimum of six months of current operating expenses.
2. Ownership of CCPs (applicable
for domestic CCPs)
(1) The authorised CCP shall be
a public company limited by shares with the shareholding as follows:
a.
The
shares of an authorised CCP shall be held by persons who are users of the
authorised CCP. If a person ceases to be a user, the CCP shall ensure that
the person’s shares are divested.
Provided, no person or class of
persons shall, directly or indirectly, individually or in concert acquire
or hold more than such percentage of the paid-up share capital of the
authorised CCP as may be prescribed by the RBI from time to time.
3. Eligibility for acquiring or
holding shares (applicable for domestic CCPs)
(1) No person shall, directly or
indirectly, acquire or hold equity shares of an authorised CCP unless he /
she fulfils “fit and proper” criteria as mentioned hereunder.
(2) No person shall transfer /
divest / sell / buy equity shares of an authorised CCP without prior
approval of RBI –
a.
If the
transfer of shares is equal to or more than 5% of the shares of the CCP or
b.
Where
the acquisition of shares and cumulative shareholding reaches 5% or more.
(3) Authorised CCP shall inform
RBI about the transfer or divestment within 15 calendar days of approval of
transfer or divestment of equity shares by its Board.
(4) Without prejudice to the
provisions of the Act, rules and / or regulations, authorised CCP shall
disclose its shareholding pattern on an annual basis to RBI, in the format
prescribed at Appendix 2.
(5) Authorised CCP shall monitor
and ensure compliance with this direction at all times.
4. Fit and proper criteria for shareholders
(1) A person shall be deemed to
be a “fit and proper” person if —
(a) such person has a record of
fairness, integrity and reliability, including but not limited to:
i.
financial
integrity, and
ii.
track
record;
(b) such person has not incurred
any of the following disqualifications –
i.
an
order for winding up passed against the person;
ii.
the
person, or any of its whole-time Directors or managing partners, has been
declared insolvent and has not been discharged;
iii.
an
order, restraining, prohibiting or debarring the person, or any of its
whole-time Directors or managing partners, from dealing in any financial
market instruments or from accessing any part of the financial market, has
been passed by any regulatory authority, and the period specified in the
order has not elapsed;
iv.
any
order or notice against the person or any of its whole-time Directors or
managing partners has been passed by regulatory authority under Anti-Money
Laundering (AML) standards / Combating of Financing of Terrorism (CFT) /
obligations under Prevention of Money Laundering Act, (PMLA), 2002;
v.
such
other criteria as may be determined by RBI.
(2) The proposed acquirer should
have positive networth as per the latest audited balance sheet. For the
share transfer where RBI’s approval is required, RBI may consider various
parameters viz. adherence to the regulatory capital adequacy norms prescribed
by the respective regulators, profitability, etc., in addition to other
aspects such as business of the acquirer, the capacity of the acquirer to
make further contributions to the equity capital of the authorised CCP in
times of need. The decision of the RBI shall be final in this regard.
(3) Such person shall submit a
declaration regarding fulfilment of requirements specified under
sub-directive (I) above to the CCP and such other information as may be
required by the CCP or RBI.
(4) If any question arises as to
whether a person is a “fit and proper” person, RBI’s decision on such
question shall be final.
Section
C
Directions for Recognised Foreign CCPs
The Act does not differentiate
between domestic and foreign entities. Any service provided by a foreign entity
shall be within the overall legal framework obtaining in India. In line
with the international developments on recognising CCPs operating in
multiple jurisdictions, the requirements for recognition of foreign CCPs
are laid down hereunder.
1. Application for approval as a
recognised CCP
(1) A foreign CCP may apply to
the RBI for approval as a recognised CCP for its operations including
clearing and settlement in India.
(2) An application shall be —
a.
made
in such form and manner as prescribed under Payment and Settlement Systems
Regulations, 2008 and
b.
accompanied
by such fee as prescribed by the RBI.
(3) The RBI may require an
applicant to furnish such information or documents as it considers
necessary in relation to the application.
(4) RBI for granting the
recognition may satisfy by way of inquiry or otherwise whether the
operation of the applicant in the foreign country is subject to
requirements and supervision that are sufficiently equivalent, in relation
to the degree of protection from systemic risk and the level of
effectiveness and fairness of services they achieve, to the requirements
and supervision to which clearing and settlement facilities are subject
under the Act and these directions and such other factors as may be
considered relevant by RBI.
(5) The applicant shall
undertake and cooperate with RBI by sharing information and in any other
manner as may be required by RBI.
(6) The infrastructure for
recognised CCP’s operations in India is required to be domestic without
relying on its overseas infrastructure.
2. The recognition shall be issued in such form and
manner as may be prescribed by RBI from time to time.
3. In addition to the requirements on complying with
the Principles for Financial Market Infrastructures (PFMI)3, the recognised CCP shall comply with the following
organisational requirements:
(a) The Directors of the
recognised CCP shall possess appropriate balance of skills, experience and
knowledge in one or more fields of finance, law, management, sales,
marketing, administration, research, corporate governance, information
technology or other disciplines related to the CCP;
(b) Such Directors shall be of
good repute and experience;
(c) The recognised CCP shall
have robust governance arrangements with a well-defined, transparent
organisational structure to manage, monitor and report the risks which it
might be exposed;
(d) The recognised CCP shall
constitute a Risk Management Committee of the Board with the members who
are sufficiently knowledgeable in the field of risk management –
i.
The
Risk Management Committee may invite senior officials and external
independent experts to attend its meeting;
ii.
The
Risk Management Committee shall formulate and review a detailed risk
management policy which shall be approved by the Board;
iii.
The
Risk Management Committee shall monitor implementation of the risk
management policy and keep the Board informed about its implementation and
deviation, if any.
4. RBI may, in course of the CCP’s operations,
prescribe such terms and conditions, as may be required for ensuring safe
and efficient functions of the CCP.
5. RBI may, from time to time, direct the recognised
CCP the extent to which the provisions of these directions shall apply to
them.
6. RBI, may, by notification, carry out such
modification or amendment to these directions as may be necessary for the
proper regulation and supervision of the recognised CCP.
1 Networth will
consist of ‘paid up equity capital, preference shares which are
compulsorily convertible into equity capital, free reserves, balance in
share premium account and capital reserves representing surplus arising out
of sale proceeds of assets but not reserves created by revaluation of
assets’ adjusted for ‘accumulated loss balance, book value of intangible
assets and deferred revenue expenditure, if any’.
2 As per the
standards set out in the PFMIs, a CCP should hold liquid net assets funded
by equity (such as share capital, free reserves or other retained earnings)
so that it can continue operations and services as a going concern if it
incurs general business losses,
3 https://www.bis.org/cpmi/publ/d101a.pdf
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