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E U R O P E A N B A N K I N G A U T H O R I T Y
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b. Joint EBA/ESMA warning on contracts for
difference
The EBA and the European Securities andMar-
kets Authority (ESMA) worked jointly to assess
the consumer risks associated with contracts
for difference (CFDs). The two authorities were
concerned that during the current period of
low investment returns, inexperienced retail
investors across the EU are being tempted
to invest in complex financial products which
they may not fully understand and which can
end up costing them money they cannot afford
to lose. The efforts will culminate in the issu-
ing of a joint warning in early 2013, based on
Article 9(3) of the EBA regulation.
c. EBA opinion on good practices for the risk
management of exchange-traded funds
As part of its work on monitoring existing and
new financial activities and product innova-
tion, the EBA worked on regulatory issues
around the risk management of exchange-
traded funds (ETFs). ETFs are, generally, se-
curities 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 ex-
perience price changes throughout the day.
The EBA was keen to ensure that potential
risks associated with ETFs are managed ad-
equately from the perspective of the credit
institution — and indirectly from the perspec-
tive of its customers. The good practices that
resulted from the work include a list of ques-
tions to assist national supervisory author­
ities in gaining an accurate picture of banks’
involvement in the ETF business, and the ad-
equacy of banks’ management of associated
risks such as liquidity and market risks.
The good practices will be adopted in March
2013 as an EBA opinion under Article 29, are
therefore not legally binding, and will contrib-
ute to the convergence of supervisory culture
and practices in the EU. Their implementation
will depend on the specific characteristics of
the credit institutions concerned as well as on
their involvement in ETF operations.
d. EBA Consumer Protection Day 2012
In October 2012, the EBA held its first Con-
sumer Protection Day, an event at which rep-
resentatives of the banking industry, national
supervisory authorities, consumer organisa-
tions and academia met and discussed issues
related to consumer protection and financial
innovation at the European level.
The programme of the day included an open-
ing speech and keynote speech, followed by
three separate panel discussions on consum-
er indebtedness, complex financial products,
and consumer trends in EU retail banking. The
event attracted 135 participants and 18 speak-
ers presented their views on particular topics.