Pension funds are concerned that decision-making at EIOPA does not always sufficiently take account of their particularities, PensionsEurope has told the European Commission, while also calling for no-action letters to be made available with regard to the sustainable finance disclosures regulation (SFDR).
In a consultation response, it said the supervisory authority’s expertise was likely to continue to develop in favour of insurance – and indicated this was logical – and said it was therefore concerned that “the decision-making processes insufficiently take into account the idiosyncrasies of occupational pensions, stemming from the strong relationship with social and labour law”.
Citing the Commission’s intention that funded pensions gain in importance in the EU as part of a more developed capital markets union, PensionsEurope said EIOPA’s governance should be equipped to deliver decisions tailored to both sectors within its remit, including occupational pensions.
It noted there were currently no provisions in the EIOPA regulation that required comprehensive coverage in expertise of both insurance and occupational pensions in selection procedures for key individuals and decision-making bodies.
While staff in the pensions team at EIOPA had built up strong expertise, “we observe that nearly all individuals in the board of supervisors have a background in insurance supervision”, wrote PensionsEurope.
Asked about the appointment of Petra Hielkema as the new chair of EIOPA, Matti Leppälä, secretary general of PensionsEurope, told IPE he did not know her, but said that “as she comes from the DNB, which supervises Dutch IORPs, I am confident that she will have a good understanding of our sector as I’m sure she has on insurers”.
“Thus, I’m confident we will have excellent and close cooperation on pension fund issues,” he said.
Hielkema joined the Dutch central bank in 2007 and has most recently been responsible for the prudential supervision of the country’s insurance sector. She starts her new role as chair of EIOPA on 1 September, for a term of five years, extendible once.
Gabriel Bernardino, who chaired the supervisory authority since its formation 10 years ago, told IPE in an exit interview that the pension fund industry was sometimes too conservative.
No-action letter for SFDR please
As part of a 2019 reform, EIOPA and the other European supervisory authorities have since last year had the power to issue what are described as no-action letters, a tool familiar from the US regulatory system.
However, PensionsEurope noted, resort to no-action letters by EIOPA is limited to rules for regulations or directives mentioned in the EIOPA regulation.
The mechanism should be updated to account for more horizontal legislation coming into place, such as the Sustainable Finance Disclosure Regulation (SFDR).
“The double implementation process of the SFDR has led to a lot of uncertainty, diverging interpretation of the rules and unnecessary costs,” said PensionsEurope.
Limitations ‘not always respected’
PensionsEurope also told the Commission that in the past decade, EIOPA had not always respected limitations on the promotion of a common supervisory culture and consistent supervisory practices in the area of pension funds.
The approach could not be the same as for other financial institutions covered by different mandates, it argued.
The association said EIOPA had advocated strongly for a more harmonised regulatory framework for occupational pensions, whereas the co-legislators had consciously decided EIOPA’s role in developing a regulatory framework under the IORP Directive should not be comparable to that under the Solvency II framework for insurers.
“Consequently, EIOPA has delivered a significant number of opinions and as such has attempted to impose a joint supervisory culture in an area where national rules diverge significantly,” said PensionsEurope.
“Moreover, we feel that EIOPA has a significant influence on the views held by [national supervisors] through non-binding communication channels.”
Overall, the EU had had a significant impact on the regulation and supervision of occupational pension funds over the past decade, PensionsEurope said.
The most notable driver of this was the revision of the IORP Directive, but more recently the legislative framework had developed towards horizontal regulations applying to the entire financial sector, such as the SFDR.