POLAND - Polish pension supervisor KNUiFE is to be dissolved under a disputed law which will see the three financial supervisory authorities merged into one.

Iwona Duda, director of the Financial Markets Development Department at the Ministry of Finance and deputy chair of the Insurance and Pension Funds Supervisory Commission (KNUiFE) has been appointed head of the re-structuring project.

The new financial supervisory authority (KNF) has already taken over the mandates of the KNUiFE and the Securities and Exchange Commission (KPWiG).

And it will take on the job of the Commission for Banking Supervision (KNB) from January 2008.

KNUiFE will be dissolved in the coming months, although some of the staff and infrastructure will be taken over by the new supervisory body, a spokesman for the pension supervisory commission told IPE. He also said that regulations regarding the supervision of pension funds would not change under the new organisation.

The KNF board will consist of seven members, two to be appointed by the prime minister (including the chair), the minister for social affairs, the minister of finance, a representative of the Polish president and the president (or vice-president) of the central bank. Under the old system all three bodies were independent of the government. It is to be financed by levies from the supervised bodies.

In May the head of KNUiFE, Jan Monkiewicz, had criticised merging the supervisory authorities. He argued that the pension funds are very different from other financial institutions and therefore need their own supervisory board.

Furthermore, he said it was a bad point in time for this re-structuring as the rather young compulsory second-pillar pension funds, introduced in 1999, needed close supervision.

Monkiewicz also pointed out the fact that the KNF was very dependent on the government and was at risk to turn into a political vehicle.

In fact, the law has already led to a power struggle between the government and the Polish central bank NBP, which is currently running the commission for banking supervision. The NBP fears to lose its independent and its president sees the new law as an act of retaliation against him.

The European Central Bank, the International Monetary Fund and the OECD also filed their concerns about the new financial supervisory authority. They point out that the NBP has to be given a bigger role in the supervisory process.

"It is not about how many people they have on the board of the new supervisory authority. It is about how they can influence its work and if they have access to the information gathered," Wiktor Krzyzanowski from the European Central Bank told IPE.

Practice will show if the new model complies with European and Polish regulations. It was also pointed out that most members on the new KNF's board did not have the expertise to efficiently supervise financial institutions.

Despite these concerns and harsh criticism from various bodies in Poland on the speed with which the law was passed, President Lech Kaczynski signed the bill in mid-August. (amends president's name)

The second pillar pension fund system in Poland currently comprises 15 pension funds with total assets amounting to around PLN80bn (€40bn). Over 60% of assets were invested in bonds, 30% in equities and the rest in securities and deposits.

Among the companies running pension funds in Poland are international players like Winterthur, Generali, ING, Nordea and Allianz.