Iceland’s financial supervisor said it plans to review the scope of the country’s pension funds, labelling such an assessment as urgent, given the institutions’ increasing importance to the island economy and presence in domestic financial markets.

In a document outlining its future priorities, entitled ’Strategic emphasis on financial market supervision 2022-2024’, the Central Bank of Iceland said that despite the strong growth of pension funds and increased activities in the past decade, legislation on activities had not been updated according to the funds’ status in the financial market.

“With increasing size and importance of the funds in the Icelandic economy and in the financial market, the need for strategic decisions about their position, activities, future and desirable development has become more urgent,” the bank said in the report published this month.

The Financial Supervisory Authority and the Central Bank of Iceland merged at the beginning of 2020.

The bank said the FSA had been calling for this action for years, and that the Act on Compulsory Insurance of Pension Rights and the Activities of Pension Funds (129/1997) would be subject to a comprehensive review and updated in accordance with the size and position of the funds – as well as with the requirements of other parties in the financial markets – for example, regarding governance, business practices and consumer protection.

“This review has become very urgent,” the bank said.

The Icelandic Pension Fund Association (Landssamtök lífeyrissjóða, LL) said the bank’s main priorities for the next two years regarding pension funds were: the scope of pension funds; governance and independence of pension fund management; and implementation and framework of actuarial assessments.

The overall strategic document covers the entire financial market, including topics such as cyber and IT security, anti-money laundering and sustainable finance.

It is intended to be “a guiding light in the reform work and priorities of the Central Bank of Iceland’s Financial Supervision Authority in the coming years”, the bank said.

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