EBA publishes Good Practices for ETF Risk Management

07 March 2013

The European Banking Authority (EBA) issues today an Opinion addressed to National Supervisory Authorities (NSAs) on Good Practices for the Risk Management of Exchange Traded Funds (ETFs).

ETFs are generally securities that track a commodity, an index, or a basket of assets like an index fund, but trade like a stock on an exchange and therefore experience price changes throughout the day.

The Good Practices attempt to ensure that potential risks associated with ETFs are managed adequately from the perspective of the credit institution – and indirectly from the perspective of its customers. They will ultimately contribute to the convergence of supervisory culture and practices in the EU.

The Good Practices include a list of relevant questions to assist NSAs in gaining an accurate picture of banks' involvement in the ETF business, and the adequacy of banks' management of associated risks such as liquidity and market risks.

The Good Practices are adopted as an EBA Opinion under Article 29(2) and are, therefore, not legally binding. Their implementation will depend on the specific characteristics of the credit institutions concerned as well as on their involvement in ETF operations.


The current EU legislation for investment funds (the UCITS Directive) governs most of the ETFs. For the purpose of this report the definition of UCITS ETF adopted in ESMA's Guidelines on ETFs and other UCITS issuesare being used.

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