PensionsEurope wants “no further changes” to the regulations regarding pension funds, as it prepares for the launch of a continent-wide stress test regime.
Janwillem Bouma, chairman of PensionsEurope, reiterated a previous call for “a period of legislative calm”, this time until a planned review of the IORP II directive in 2020.
Speaking at the occupational pensions conference organised by the German newspaper Handelsblatt in Berlin, Bouma criticised the European Insurance and Occupational Pensions Authority’s (EIOPA) approach to further reforms.
“PensionsEurope has rejected the holistic balance sheet [HBS] approach but EIOPA continues to work on the ‘common framework’ – as if a name change was changing the subject,” Bouma said. “IORP II already contains a thorough framework for pension risk management and pension funds already regularly carry out stress tests as part of their own processes.”
Bouma warned that HBS was “not an appropriate instrument and it should not be part of the stress tests”.
He also added a possible alternative approach for EIOPA: “By using alternative approaches such as cash flow analysis many of the problems that the ‘common framework’ would bring could be avoided.” As an example, Bouma cited the mark-to-market approach.
But the PensionsEurope chairman also added some positive notes, welcoming the decision to use one scenario, rather than three, “which means fewer costs and less effort for IORPs”.
EIOPA chairman Gabriel Bernardino confirmed the stress tests will be issued “in mid-May” this year, as planned.
“This year’s stress test will include all European countries with material IORP sectors,” he said.
He added that the stress tests would help to “assess the impact of pension funds on the real economy”.
“Defined benefit pension funds will have to calculate the impact of adverse market scenarios on plan assets and defined contribution plans the impact on future pension income,” Bernardino said.
The EIOPA chairman also called on all stakeholders to take part in EIOPA’s current survey on pan-European DC pension frameworks, which is open until 4 April.
Every EU member state must finalise implementation of the IORP II directive by 31 January 2019, but Christian Röhle, head of Pensionskassen management at the pension fund of Hoechst group, warned German funds would have to find a way around a potential problem with the new rules.
“A problem might arise from the fact that synergies, e.g. using the same risk manager for the company as for the pension fund, are no longer allowed,” he said.
Many companies in Germany are using the same experts and board members for their pension funds but in future they will have to ensure compliance standards are met and conflicts of interests are managed. Röhle called for German authorities to introduce an exemption for this rule and “to keep the proportionality principle in mind”.