The Danish Financial Supervisory Authority (FSA) announced today it has given the IBM Pensionsfond in Denmark official orders after it found some of the assets earmarked to cover its liabilities were in fact also pledged as security to cover derivatives deals.

The US multinational’s defined benefit (DB) pension fund for Danish employees, which is closed to new members, was the subject of an inspection by the FSA in March, where the focus was on the investment area and registered assets, the watchdog said.

“A company pension fund must have sufficient suitable assets, the total value of which must at all times be at least equal to the value of the company pension fund’s total pension provisions,” it said.

The company pension fund had to keep a register to ensure the presence of the assets, it went on in the statement.

The FSA said the pension fund’s investment approach was to be able to deliver a total return large enough to cover the pension obligations and ensure a solvency level sufficient to absorb both financial and non-financial risk.

“The Danish FSA found that the pension fund’s register includes assets which have been pledged as security for the pension fund’s derivative transactions, and which are therefore not free and unencumbered,” the Copenhagen-based authority said.

The FSA noted that IBM Pensionsfond had been handed an official order to calculate the registered assets without including encumbered assets, and that as of the first quarter of 2024, after deducting encumbered assets, there were sufficient assets in its register to cover its pension provisions.

“The Danish Financial Supervisory Authority has also ordered the pension fund to ensure that guidelines, business procedures, etc. regarding registered assets support that the register is continuously calculated without inclusion of encumbered assets or with deductions for encumbered parts, so that it is ensured that there are sufficient assets at all times which can serve to satisfy the membership and the beneficiaries,” the supervisory agency said.

IPE has contacted IBM in Europe for comment on the case.

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