On March 7, the European Banking Authority (EBA) issued an opinion addressed to National Supervisory Authorities (NSAs) on good practices for credit institutions in their risk management of exchange traded funds (ETFs).

The EBA’s opinion aims to assist bank supervisors in assessing risk when participating in ETF businesses, by setting out high level descriptions of non binding good practice and guidance in relation to managing the key risks encountered by credit institutions.  The opinion specifically focuses on funding requirements and liquidity, credit risk and collateral management and market risk.  The EBA has noted that how credit institutions choose to implement good practice will differ depending on their individual characteristics and their exact involvement with ETFs.