AUSTRIA - No tightening of pension fund regulations in the wake of the subprime crisis are planned in Austria, the supervisory body FMA has confirmed.
While other European supervisors had at least mulled stricter investment regulations for institutional investors, following losses suffered through structured products and other investments, Austrian regulatory officials say they see no need for change.
"The current regulatory framework in Austria is sufficient," Helmut Ettl, member of the board at the FMA, told IPE.
"The performance of Austrian Pensionskassen was negatively influenced by market turbulence but that can always happen when you invest in the capital markets."
According to calculations by the FMA , the average performance of pension funds for the last year was 1.97% - similar to the 2% figure reported by the Pensionskassen association earlier this year.
At a press conference in Vienna today, he added the FMA has put in place regulations to facilitate the introduction of the 'life cycle model' in Austrian Pensionskassen, which is designed to decrease the risk to a pension fund member's portfolio the closer they get to retirement.
A new risk management directive for Pensionskassen which increased risk management and prudency in the pension funds only came into force last year.
The FMA noted two Pensionskassen had come under scrutiny in 2007 over compliance with that directive.
No names or details were revealed but the supervisory body said it was the first time the instrument of an on-site inquiry, so far mainly used in the banking sector, was used in supervising pension funds.
The FMA noted all of Austria's financial institutions remained strong despite the "difficult market environment" - including Austrian banks which have hardly suffered as a result of the subprime crisis and in some cases even increased their capital resources.
"The subprime-crisis was bearable for Austrian banks because of their strong foothold in Central and Eastern Europe," noted Ettl.
While supervision of investments and asset allocation will be intensified, the FMA sees no need for more legal restrictions.
In Germany, however, the supervisory authority has mulled increased investment restrictions and has come under criticism for doing so.
"There is a persistent belief that regulation will solve the problem," Oliver Roll, formerly with Threadneedle in Germany, had told IPE earlier.
"However, the truth is quite to the contrary. Many investors, like regional banks, had to search for return in credit spread products as they were restricted in, for example, hedge fund investing, and then they were hit by the sub-prime crisis. If the regulator bans more asset classes investors will find new products and this will prompt the inventiveness of providers." (see earlier IPE-article: Institutions focus on risk)
The FMA noted a major challenge for 2008 is massive growth in the Austrian investment fund industry.
"The market is booming and Vienna has now become the ninth largest investment fund market in the EU-25 region," Ettl noted.
Together with the finance ministry, the FMA is currently trying to work out how to tackle non-EU domiciled funds and companies listing on the Vienna stock exchange and other international deals which they deem as lacking transparency.
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