ECB's planned pension fund reporting requirements criticised
The planned European Central Bank (ECB) regulation on statutory reporting requirements for pension schemes could lead to extensive reporting obligations – and considerable additional costs – for pension institutions, according to speakers at a recent roundtable event in Frankfurt.
The regulation is to be adopted in the second half of 2017.
Speaking at the roundtable held by German think-tank Pensionsakademie, Roberto Cruccolini, adviser on economic policy issues at the German association of local and church pension schemes (AKA), said: “Initial estimates indicate that up to 30% of the annual management costs for investment, or up to 15% of the annual general administrative costs, could be incurred for implementation, depending on the institution, as well as a substantial increase in the running costs, for example for constant maintenance of IT systems, although these are hard to estimate.”
According to Cruccolini, IT systems would need to be aligned with the new ECB requirements to provide consistent transaction data on the total inventory of pension portfolios. This would mean additional programming expenses or even the purchase of new IT systems, which would lead to considerable additional costs.
Cruccolini suggested that the ECB and national central banks should make sure the additional reporting requirements were relevant in order to keep the additional costs to a minimum.
He said: “It would be desirable for the ECB to set the scope, detail, frequency, and deadlines of the future reporting requirements with care and consideration for the future reporters – i.e. the pension institutions – and to respect the proportionality principle by designating thresholds for insignificant positions and small institutions.”
Andreas Fritz, chairman of Pensionskasse für die deutsche Wirtschaft, a €1.7bn multi-employer pension provider, also had a critical take on the planned ECB reporting obligations.
“From a cost perspective every additional regulatory or reporting obligation that does not serve the operational business is one obligation too many, especially for small companies,” he said. “There is no benefit to be seen for those supplying the data nor is the envisaged merger of asset-liability data based on any internationally recognised standard.”
Cruccolini described the requirements currently planned by the ECB as extremely problematic and of doubtful necessity.
According to Cruccolini, considerable practical problems would arise when different systems – such as pay-as-you-go or part-funded systems – were grouped together or institutions switched their system of financing. This would cast serious doubt on the value of liability data, he said.
He said a sectoral and geographic breakdown, as well as the planned fair value measurement of liabilities, would only be an additional burden since this data was not already collected or prepared in this form for supervisory purposes. Furthermore, many institutions would currently be unable to meet a seven week reporting deadline.
Karl-Peter Bertzel, chairman of the Board of Pensionkasse Berolina, the pension fund for Unilever Germany, said it was important to engage early with the future ECB reporting obligations in order to assess the possible costs and to search for efficient ways to implement the ECB’s reporting requirements in dialogue with other reporting parties or in collaboration with the various trade associations.
Among other things, one could draw on the insurance industry’s experience with the reporting obligations and gain insights into possible demands on pension institutions, according to Bertzel.
Insurers have been required to submit statistics since 2016, after a corresponding EU regulation was adopted in 2014. Holger Bennewiz, chief investment officer at Athene Lebensversicherung, a life insurer, gave an insurer’s perspective on the reporting obligations. In his view, parallels could reasonably be drawn with the planned ECB reporting requirements for pension funds, which could be faced with a similar catalogue of requirements.
This article originally appeared on IPE’s sister website, Institutional-Investment.de, and is available here.