IORP II: Is the end of the road in sight?
Keep your eye on Brussels – the next few weeks could get interesting, says Cécile Sourbès.
Believe it or not, the European pensions industry is at a turning point. While it is still unclear exactly what Brussels will propose in its final draft of the revised IORP Directive, some vital clues on the European Commission's thinking on the matter are expected some time in the next few weeks.
The Commission has been reviewing the results of the first quantitative impact study (QIS) for the implementation of the new Directive since 9 April.
That day, the European Insurance and Occupational Pensions Authority (EIOPA) – in charge of collecting all the data from pension schemes participating in the exercise – sent its preliminary results to Brussels.
But as EIOPA itself mentioned at the time, the report was only "preliminary". The Frankfurt-based authority explained that the intermediary results aimed to meet the deadline set by the Commission and then insisted on the need to publish a final, more in-depth report at a later stage. This would appear to be arriving later in June.
In light of this, it would not be unreasonable to assume Michel Barnier, the commissioner in charge of the EU internal market, might want to wait for the final analysis of the QIS to arrive on his desk before making up his mind.
But a few signs would suggest an announcement from his side could be in the offing.
First, in its preliminary report, EIOPA made clear that a number of issues with the first QIS were still unresolved, and said further work was needed on other elements of the technical specifications.
Yet the Commission is increasingly pressed for time. A new round of EU commissioners is likely to take over next year, and Barnier might want to finish his work on the revised IORP Directive sooner rather than later.
Second, Barnier is speaking at the Global Reporting Initiative conference in Amsterdam at the end of this week. Some sources in Brussels suggest the timing might be right for him to make an announcement on the IORP framework.
After all, some of the key changes concerning the new directive came when the pension industry least expected it. The delay of the directive, not to mention the Green Paper on Long-Term Investing, were announced at the InsuranceEurope annual conference last year.
So, what are the options?
One could see the Commission sticking with the current proposals, including solvency-based capital requirements.
This, however, would not make much sense since such a move would undermine EIOPA's reputation.
The authority's experts have spent months working with the pensions industry to produce a comprehensive analysis of the potential impact the revised IORP Directive could have on occupational pensions. Would the European Commission really ignore all of EIOPA's work? It's hard to believe.
Another line of reasoning would lead us to believe the Commission might want to water down the capital requirements without completely dropping them.
How, exactly? By waiting for the stakeholders' input on the Green Paper on Long-Term Investing.
Needless to say, the industry will not miss the opportunity to voice its concerns over the capital requirements set in the revised IORP Directive.
In another scenario, Brussels drops pillar one of the revised IORP Directive – at least for now.
This would have two main advantages. First, it would give more time to the Commission to focus on pillars two and three, which concern governance and disclosure, respectively.
These issues have always been at the heart of the Commission's project to improve good practices in the pensions domain.
This would also support the idea that Barnier could be willing to make a major announcement this Thursday, speaking specifically about reporting at the Global Reporting Initiative conference.
Second, this would allow Barnier to secure his legacy before he is replaced next summer.
Would this mean the pensions industry could finally end lobbying efforts and rest on its laurels?
Well, pillars two and three are still looming in the background, and pension schemes might also face some important changes in disclosure requirements and the structuring of their own teams, which would entail additional costs.
Let's be honest, though. Any new regulatory framework that has emerged in the past has brought higher costs to the industry concerned.
But the ultimate goal here is precisely to lower those costs as much as possible, regardless of the negotiating efforts involved.