The Dutch regulator could outsource supervision of “low-risk” pension funds to private sector providers, it has said.
The pensions supervisor De Nederlandsche Bank (DNB) said pension funds with a low risk profile and sound internal supervision could have some regulatory tasks handed over to external providers.
In a report about “proportional and effective supervision”, published last week, DNB said the conclusions were the result of a survey – based on feedback from the sector – into whether supervision had been excessive since the financial crisis.
According to Frank Elderson, supervisory director for pension funds at the regulator, DNB could, for efficiency reasons, request certain information from providers rather than from pension funds.
However, as providers are currently not supervised by DNB, involving them would require legal changes.
Elderson said that DNB would also consider sourcing information from asset managers.
The report also suggested increased remote supervision of low-risk pension funds, with DNB relying on information and statements from external parties, including actuaries and accountants.
Elderson added that a scheme’s funding could also be used as a criterion for relaxing supervision.
Jan Sijbrand, DNB’s chairman for supervision, pointed out that the report was the result of a “listen project”, and that the watchdog had compiled a list with more than 100 issues based on signals and complaints from the sector.
The report said the regulator’s ad hoc requests – such as for sector and themed surveys – posed the largest supervisory burden for pension funds, as they sometimes came unexpectedly and had short deadlines.
DNB rejected warnings from the sector that boards had become distracted by regulations and could not pay sufficient attention to risk management and strategy as a consequence.
The survey, however, found that the boards of small pension funds often had to spend more than 30% of their available time on regulations, with indirect costs making up 75% of total supervision costs, compared to 40% at large schemes.
The watchdog also promised to proportionally apply the IORP II directive’s requirements for key positions to small and medium-sized pension funds, which were worried that they no longer could outsource, for example, actuarial services.
DNB said that it was open to a dialogue with pension funds about their proposals for adhering to the rules set by IORP II.