FT Alphaville " ETFs as shadow banking entities Posted by Izabella Kaminska on Mar 20 11:25. A list of shadow-banking entities, as defined by the European Commssion in its latest green paper on shadow banking: And some more on the role of ETFs in the shadow banking universe: As far as ETFs are concerned, the FSB has identified a possible mismatch between liquidity offered to ETF investors and less-liquid underlying assets. The current regulatory debate focuses on possible liquidity disruptions; the quality of collateral provided in cases of securities lending and derivatives (swap) transactions between ETF providers and their counterparties; and, conflicts of interest where counterparties in these transactions belong to the same corporate group. Some of these issues are not confined to ETFs. They arise in every instance where securities owned by an investment fund are lent to other counterparties or where a fund enters into a derivative transaction (e.g. total return swaps) with counterparty. In addition, ESMA is currently carrying out a review of the UCITS framework in general and in particular as regards the potential application to ETFs, with a view to adopting new guidelines this year. The guidelines will include recommendations regarding the labelling of ETFs, disclosures to investors and use of collateral. Related links: EC paper sheds light on dangers of shadow banking - Risk Clients, banks, three-letter acronyms and conflicts of interest - FT Alphaville This entry was posted by Izabella Kaminska on Tuesday, March 20th, 2012 at 11:25 and is filed under Capital markets. Tagged with etfs, repo, shadow banking.