Large swathes of the revised IORP Directive, including the proposed risk-evaluation for pensions (REP), are to be cut under plans drawn up by European parliamentarian Brian Hayes.

The Irish MEP, IORP rapporteur for the European Parliament’s Economic and Monetary Affairs Committee (ECON), also said the introduction of the holistic balance sheet (HBS) was “not realistic in practical terms” and proposed changes to cross-border funding arrangements.

In his preliminary report on the Directive, Hayes suggested that neither the European Commission nor the European Insurance and Occupational Pensions Authority (EIOPA) had the power to draft additional technical standards – essentially removing the ability to impose additional requirements without parliamentary scrutiny.

He also raised concerns about EIOPA’s development of the HBS, arguing that the model was not “realistic in terms of costs and benefits” in light of pension fund diversity across Europe.

Attempting to put to bed any speculation about the introduction of capital requirements without a further Directive, the report added that no capital requirements for IORPs based on either Solvency II or the HBS should be developed “at [EU] level”, as these could “potentially decrease the willingness of employers to provide occupational pensions”.

The report also removed the requirements for the REP, instead suggesting a fund should conduct risk assessments in line with the “nature, scale and complexity of its activities”.

Hayes’s stance comes after a number of changes to the REP, with a compromise draft drawn up by the Council of the EU last year suggesting individual member states would be granted powers to dictate the scale of assessment needed.

The Commission’s initial proposal required a regular evaluation of internal risk management procedures, funding requirements and the impact of climate risk on the fund’s portfolio, among other areas.

In what appears to be a well-intentioned attempt to remove requirements for full funding from cross-border IORPs, Hayes also proposed that IORP full funding requirements should only take effect from “the moment when the institution starts operating a new or additional scheme”.

The wording echoes an earlier proposal to impose full funding requirements only when a cross-border fund is established, potentially allowing for a vehicle to be launched with a single, fully funded member.

However, the wording proposed by Hayes made no mention of cross-border activities, implying that the full funding requirements would be imposed on all regulated IORPs.

The parliamentarian also amended a clause specifying that member states should allow IORPs to be underfunded “for a limited period of time”, potentially opening the door to host member states to set recovery periods for cross-border funds under their jurisdiction.