The Bulgaria Financial Services Commission (FSC), the pension regulator, is calling for independent external reviewers to assess the assets of the country’s second and third-pillar pension funds.

The reviews will be overseen by a steering committee that includes representatives from the FSC, finance ministry, Bulgarian National Bank, European Commission and the European Insurance and Occupational Pensions Authority (EIOPA).

According to the FSC, the main objectives of the reviews include verifying the presence of pension fund assets at custodian banks and performing a valuation of the assets in accordance with current Bulgarian legislation.

The reviewers have also been asked to assess the appropriateness of the valuation principles, a contentious issue for the Bulgarian Association of Supplementary Pension Security Companies (BASPSC), which considers the FSC’s time-weighted return methodology simplistic.

The FSC has asked the reviewers to pay special attention to investments with ownerships connected to the funds and their managing companies, an issue of long-standing concern for Bulgarian legislators and the European Commission.

The FSC is seeking opinions on pension fund governance, including internal control mechanisms and legal compliance.

Risk evaluation forms a major part of the reviewers’ scope.

The FSC wants the reviewers to assess the pension funds’ risks as defined by the current legal framework, identify risks not currently captured by legislation and highlight potential systemic risks to the rest of the financial sector and the real economy.

The reviews, set to start this April and finish at the end of June, with 31 March as the reference date, will cover the country’s 18 universal and professional second-pillar funds, and the nine voluntary third-pillar funds.

The funds themselves will pay for the exercise.

Rodina, Bulgaria’s only voluntary occupational fund, has been excluded from the process.

Bulgaria’s pensions sector has faced a turbulent period, with weakened 2015 returns and the parliament voting to convert the mandatory second pillar into a voluntary one in July 2015.

The annual weighted average return for the universal pension funds fell from 6.13% in 2014 to 1.47%, and that of the professional funds from 5.89% to 1.78%, while the voluntary funds’ return declined from 6.64% to 1.68%.