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German regulator reveals results of local stress tests for pension funds

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Only nine of the 126 Pensionskassen regulated and tested by German regulator BaFin failed national stress tests performed at year-end 2014, the watchdog announced.

In its annual report, BaFin points out that this is two fewer than reported the year previous, and that solvency levels of Pensionskassen had improved slightly over the period.

With its own stress tests, the regulator seeks to gauge the resilience of market participants to various market downturns in one or more asset classes.

The tests do not include a quantitative assessment, as it is done under Solvency II.

In general, solvency levels among German Pensionskassen have increased from 135% to 138% year on year.

As of year-end 2014, only one Pensionskasse – which, in Germany, are set up chiefly as an insurance-like vehicles – failed to meet its solvency requirements.

BaFin warned that, if interest rates continued at their currently low levels, Pensionskassen would “suffer more than life insurers” because of their longer-term businesses and the fact they have to pay out life-long pensions.

For 2014, the average interest granted on members’ assets in Pensionskassen amounted to 4.1%, slightly below the 4.4% average for the year previous.

In total, the Pensionskassen regulated by BaFin managed nearly €140bn in assets, as per year-end 2014, having seen their assets grow by 6% through returns and contributions.

Meanwhile, a spokesperson for BaFin confirmed to IPE that the supervisor had chosen a sample of Pensionskassen that will take part in the stress tests conducted by EIOPA later in May.

It declined to reveal the size of the selected candidates to avoid speculation on the identities of the institutions.

However, the spokesperson confirmed that the German government would meet EIOPA’s target of covering 50% of the balance sheet total of pension assets in the market.

Several pension fund associations have warned that, because mostly large institutions are to take part in the stress tests, the results will reflect only one part of market.

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