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Swiss keep pension supervision outside new authority

SWITZERLAND - The Swiss parliament has rejected proposals to merge the supervision of pension funds with that of other financial institutions.

The upper house of the Swiss parliament voted this week on a new law to create a new joint financial supervisory authority, FINMA. This would bring together the supervision of banks, private insurers and money laundering under one roof - but pension funds are not included.

However, there was no majority for a proposal of the right-wing party SVP to include pension funds under the supervisory umbrella as well.

"There are various reasons why the Federal Council decided against including the supervision of pension funds into the new FINMA at this stage," David S. Gerber, department head of the financial markets and financial services unit at the Swiss Federal Finance Administration, told IPE.

"For one, occupational pension schemes, which are mandatory in Switzerland, fall under the social security regulations. It would have needed a change in regulations to integrate this sensibly into the new financial supervisory authority. That would have been impossible from a political point of view," he said. Gerber also said that the law on the creation of FINMA does not substantially change legislation in any of the sectors of supervision.

Gerber added that the Federal Council also wanted to prevent the new authority from being overloaded from the start. "In the distant future the integration of pension funds could still be considered."

For now - as reported by IPE - the government is looking into an overhaul of the current pension fund supervision. It wants smaller cantons to join forces to create supervision clusters in order to make better use of limited resources. Supervision of pension funds operating nationally should, in return, be shifted from the federal level to the cantons or supervisory regions.

These regional authorities would in turn to be supervised by a new independent federal body. The federal authority will be responsible to ensure that the supervision of pension funds takes place according to uniform standards.

According to Gerber, it will also have powers to draft minimum regulatory requirements for all cantonal supervisory bodies and to assess funds' financial situation on a regular basis.

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