GERMANY – Commerzbank has established a contractual trust arrangement (CTA) to fund its pension liabilities, thereby removing them from its balance sheet.
Commerzbank said its CTA, essentially an external pension fund, would finance €1.5bn in pension liabilities. The liabilities stem from 41,000 current and former Commerzbank employees and pensioners.
“As a result of the move, our employees will get a corporate pension that is in line with international standards,” said Commerzbank CFO Eric Strutz. “Moreover, the move will improve the bank’s transparency.”
A spokesman for Commerzbank said Cominvest, its fund arm, had been awarded the mandate to invest the CTA’s €1.5bn.
“However, there was a beauty contest involving other external asset managers,” he told IPE. “We wanted to make sure that we were selecting the best manager for the CTA’s assets.”
The spokesman could not disclose further details of the CTA project, including whether an asset-liability study had been conducted and whether the fund’s strategic asset allocation had been established.
A few years ago, Commerzbank switched its employee pension plan to defined contribution from defined benefit.
Commerzbank is the latest company quoted on the Dax-30 to create a CTA for its pension liabilities following last year’s adoption of international accounting standards by listed firms. IAS regards the CTA as an ideal way of financing pension liabilities.
Other Dax-30 firms that have set up CTAs over the last year include engineering firm MAN, chemical giant BASF, energy giant E.ON, consumer chemicals firm Henkel, Allianz-Dresdner and Deutsche Börse.