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EIOPA responds as PensionsEurope echoes common framework fears

PensionsEurope has called for a “period of legislative calm” in a follow-up position paper on EIOPA’s proposal for a common framework for risk management, with the association saying it was “strongly opposed” to EIOPA’s call for national authorities to take regulatory action based on the common framework tool.

The European Insurance and Occupational Pensions Authority (EIOPA) issued its proposal in April.

Reactions from the industry in the immediate wake of the announcement were positive about EIOPA’s decision to drop its work on solvency but negative on the proposal for a common framework, to be used for risk assessment and transparency for defined benefit (DB) pension schemes.

PensionsEurope issued a brief statement at the time, saying the common framework was “costly” and “unnecessary” and that it would comment in more detail at a later stage. 

Since then, the German occupational pensions association, aba, has raised concerns about EIOPA’s proposal, in particular its fear that the supervisory authority could yet make a move that would effectively lead to solvency requirements for Institutions for Occupational Retirement Provision (IORPs) – the frequently made holistic-balance-sheet-through-the-back-door argument.

This is based on EIOPA’s having called for national supervisors to be provided with “sufficient powers to act in response to the conclusions of the standardised risk assessment”.

PensionsEurope’s latest reaction to EIOPA’s proposal appears to echo aba’s argument.

Janwillem Bouma, chair of the European pension fund association, said IORP II, the new EU occupational pensions legislation, “contains a thorough framework for pension funds’ future risk management and assessment” and that IORPs regularly carry out “essential” risk management processes.

“Now it is time for a period of legislative calm in order that pension funds can concentrate on delivering adequate, safe and affordable pensions and retirement provisions for their members and beneficiaries,” said Bouma.

Matti Leppäla, secretary general of PensionsEurope, welcomed EIOPA’s decision to “refrain” from introducing EU-level harmonised funding or capital requirements, as this would have “significant negative impacts”.

He added: “We are therefore strongly opposed to requiring national competent authorities to act upon the results derived from a risk management and transparency tool using the common framework because this would be introducing a holistic balance sheet through the back door.”

Leppäla said the IORP II Directive “stresses that the further development at the EU level of solvency models, such as the HBS, is not realistic in practical terms and not effective in terms of costs and benefits, particularly given the diversity of IORPs within and across member states”.

This means no quantitative capital requirements should be developed for IORPs at the EU level, he said, noting that they could make employers less willing to provide occupational pension schemes.

“PensionsEurope calls for policymakers and EIOPA to respect this,” he said.

EIOPA: ‘Further work can be done’

Asked whether EIOPA planned to formulate guidelines or rules for Article 29 of IORP II that would bind national authorities to act on the results of a risk management using the common framework, a spokesperson at the authority told IPE it was “convinced” the recommendations it made in its April 2016 opinion paper would “ensure a consistent application of the principle of market-consistency”.

“Guidance for establishing the common framework should, as far as possible, be provided at European level,” added the spokesperson.

“However, further work can be done to develop additional simplifications and European-wide guidance that facilitate the proportionate application of the common framework.”

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