EUROPE – The European Commission’s plans to introduce Europe-wide solvency requirements for pension funds at an unspecified “later date” are still unlikely to ever get past a vote by the EU’s Council of Ministers, according to JP Morgan Asset Management (JPMAM).
In a paper entitled ‘IORP II Lite: the end of Solvency II for pensions?’, the asset manager argues that the Commission’s recent decision to remove solvency requirements due to the Council’s system of voting weights would have made it “very difficult” to push IORP 2 through, in light of Belgium, Germany, Ireland, the Netherlands and the UK’s opposition.
Paul Sweeting, European head of strategy at JPMAM, said even a future vote would be unlikely to succeed, assuming those countries that have opposed it so far continue to do so.
“It is by no means clear that even a revised first pillar would pass the various stages necessary for it to become part of a directive,” he said.
He said the countries opposing the inclusion of capital requirements would need the support of only one additional country, no matter how small, to achieve a blocking minority in the European Council if the Commission were to reintroduce capital requirements.
JPMAM based its conclusions on the current population figures in the five countries opposing the introduction of pillar one in the revised directive.
According to the report, the countries have combined populations of 177m, representing 34.87% of the EU’s total population.
“Under the Lisbon rules,” Sweeting said, “for legislation to be blocked, it must be opposed by countries whose inhabitants together account for 35% of the total EU population – and we estimate that the five opposing countries will account for 34.87% of the populace, only a few hundred thousand short of a blocking minority.
“Even the smallest country in the EU – Malta – has three votes, so it will be no more difficult than before to block this legislation.”
Sweeting also rejected the notion that the introduction of Croatia, which joined the EU on 1 July, would change the situation measurably (as the number of votes needed to block the legislation will necessarily increase).
“Would the first pillar stand more of a chance of acceptance after these changes?” Sweeting asked. “We do not believe so.”