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ING pension fund loses court case against Hungarian supervisor

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  • ING pension fund loses court case against Hungarian supervisor

HUNGARY - ING's second-pillar pension fund in Hungary has lost a court case it brought against the country's financial supervisory authority against the latter's claim that the fund had imposed excessive costs on its members.

Hungary's Financial Services Authority had accused four pension funds of violating investment rules, arguing that they had placed savers' money in investment funds rather than directly into equities, which the regulator claimed was cheaper.

The four funds - run by Aegon, Axa, ING and Hungary's OTP Bank - were instructed to pay back the "extra costs" incurred to scheme members.

While two funds did so, ING and OTP disputed the regulator's claims and sought a court ruling to force the regulator to revisit its decision.

This court decision means the FSA's ruling will stand in ING's case, although the Dutch-owned bank can appeal to a higher court.

The court has not yet ruled on OTP's claim.

The ruling comes at a time of great uncertainty over the survival of the remnants of Hungary's funded pension system, once the largest in the region.

In 2011, Hungary's government, which was facing a severe budget squeeze after its 2010 decision to cancel its stand-by agreement with the International Monetary Fund, coerced some 3m savers to transfer €10bn in pension assets back into the state pension system, by saying those who refused would not receive a state pension.

This threat has since turned out to be a bluff.

The government is no longer transferring money into the remaining pension funds, meaning their long-term survival is in doubt.

Last week, Austria's Erste bank announced it was closing down its second-pillar pension fund in Hungary, saying regulatory changes meant "profitable operation [was] impossible".

In an interview with the news portal Origo.hu today, the economist and pensions expert György Németh said: "It's very doubtful that there will remain any funds at all. With regulations as they stand, they'll die out.

"It's obvious the government wants to wind up the sector. But rather than doing this by passing a law, they're hounding them into an impossible situation."

Meanwhile, there are signs the country's remaining third-pillar, voluntary pension funds could also see unexpected changes to their regulatory environment, though the government has revealed no details.

In January, György Matolcsy, the national economy minister - Hungary's finance minister - said in an answer to a written question: "[Voluntary pension funds] have reached a stage where they should not be subject to overregulation. There is good reason to simplify their administration, deregulate them and possibly introduce a new regulatory model."

However, the swiftness with which the second pillar was dispatched has prompted many to treat with scepticism claims that the third pillar's future is secure.

Despite the nationalisation of second-pillar funds in 2011, last year's budget deficit came in at more than 3% for the eighth year running, prompting the European Commission to threaten Hungary with a freeze in structural fund payments.

In the same interview, Németh, a former adviser to Fidesz, the governing party, said: "I don't know what they're planning, but if the government should happen to be planning to lock horns with banks and insurers on this front as well, then they'd be very unwise."

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