EUROPE – The European Central Bank says it expects a greater role for pension funds in the new European Union member states.
“Broadly speaking, the expected catching-up of the economies of the new member states in financial and real terms is likely to have two main implications for their financial structures,” said ECB vice president Lucas Papademos.
The first was a deepening of financial intermediation and the development of capital markets.
Secondly “it is likely to promote an increased role for non-bank financial intermediaries, such as pension funds and life insurance companies, whose presence is very limited when compared with the euro area countries”.
He told a conference organised by the Bank of Latvia in Riga that financial sector balance sheets are expected to expand substantially in most of new member states over the next decade.
“Similarly, bond and stock markets are likely to develop significantly, along with life insurance companies and pension funds.”
Papademos said the new states faced a “key policy challenge” to safeguard banking systems and “the robust and stable development of financial markets”.
In October last year the ECB warned that the demographic shift will be more severe in most of 11 non-euro area member states than the European Union average.
It said: “While pension system reforms have been initiated in a number of countries, pension but also health care systems are likely to bring substantial pressure to bear on fiscal positions in some countries.”