PFZW, the €165bn pension fund for the Dutch healthcare industry, and its asset manager PGGM have called on the European Commission to harmonise tax rules for pension funds across the European Union.

Responding to the consultation on the regulatory framework for financial services, PFZW and PGGM argued for a single ‘pension fund’ definition for tax benefit claims.

“This,” they said, “would significantly contribute to removing undesirable and unnecessary obstacles for pension funds when investing in other member states. 

“Such harmonisation should prevent tax evasion, assist in collecting unpaid tax claims, boost the single market for all member states and contribute to investor protection.”

PFZW and PGGM said high-quality government bonds should be allowed as collateral for OTC derivatives under the rules of the European Market Infrastructure Regulation (EMIR) and Capital Requirements Directive IV, as opposed to just cash. 

They said the requirement to clear OTC derivatives centrally would force pension funds to divest a significant proportion of their assets for cash, which would, in turn, hurt returns.

Rather than a permanent exemption for pension funds, they said they preferred a “robust central clearing that would also function in stressed market conditions”.

They also championed the inclusion of synthetic securitisation in the proposed regulatory framework of Simple, Transparent and Standardised (STS) securitisations, “as they can help shift risks off banks’ balance sheets and share these with investors outside the banking sector”.

They said they supported post-trade transparency only shortly after a trade “to prevent market-disruptive behaviour of market participants and to avoid price distortion”.

They also argued that pre-trade and post-trade transparency could disrupt OTC markets, as well as increase institutional investors’ trading costs.

Lastly, they said algorithmic and high-frequency trading should be regulated and monitored in MiFID II, “as it is the behaviour of market players that creates problems”.