AP Pension has been ordered to shore up its management structures by the Danish FSA, in a post-inspection report in which the authority issued the commercial mutual pension fund with 35 separate official orders to remedy failings.
The €15.8bn Copenhagen-based pension fund was told by the financial watchdog: “In the improvement of the management structure, the company should focus on strengthening the three lines of defence.”
In the wide range of regulatory failures uncovered by the inspection which took place in January and February 2019, the FSA took aim at shortcomings in the company’s compliance, audit and actuarial functions in particular.
AP Pension responded in a statement on its website, saying it took the report very seriously and has already righted more than half of the failings.
“It is the opinion of the Danish FSA that AP Pension has under-implemented parts of the new legislation, which both the board of directors and the executive board of AP Pension agree with,” it said.
Among other things, the Danish FSA had pointed out that its management system was inadequate, it said, adding that this meant the pension fund had to make a number of improvements.
These included more and better ongoing controls and increased reporting partly between upper management and the executive board and partly between the executive board and the supervisory board.
Other improvements that had been called for by the FSA were the allocation of more resources to certain areas and a clearer separation of functions in some areas, AP Pension said.
Lægernes rectifies illiquid credit detail
Separately, the regulator put out another report on Lægernes Pension, the Danish doctors’ pension fund, regarding its illiquid credit investments – handing out six official orders to rectify certain issues.
This report was part of the FSA’s ongoing focus on illiquid credit – for example investments in loan portfolios – in which it is examining the asset type at several life insurance companies and labour-market pension funds.
The FSA said its inspection, carried out in February 2019, covered the pension fund’s organisation and processes for illiquid credit investments, including its investment decisions and compliance with the prudent person principle.
Lægernes Pension responded to the report, saying the orders to rectify were mostly about the level of detail in illiquid credit policies and guidelines.
“The rules on unlisted investments have been strengthened sharply in recent years,” it said, adding that because of this, the pension fund had hired external consultants to review its unlisted investments last year, before the inspection.
“The consultants identified a number of focus areas. There is a great correlation between the consultants’ recommendations and the supervisory order,” the fund said.
“We, therefore, expect to be able to implement the necessary measures quickly in cooperation with the Danish Financial Supervisory Authority,” it said.