01 July 2011

IPE: What do regulators need?

The article deals with the question 'what do good pension regulatory and supervisory bodies need?' In answer, they require detailed technical, legislative, regulatory and institutional knowledge, depending on their field, or a combination of all of the above to different degrees.

The Netherlands merged its Pension and Insurance Chamber with the Nederlandsche Bank in 2004 to create a body with supervisory powers for pension institutions and insurers that also has responsibility for financial stability and acts as economic adviser to the Dutch government. In the UK, the Labour government took the macro-prudential capabilities away from the Bank of England over 10 years ago, when it wrapped a variety of product regulatory and institutional supervisory bodies into the Financial Services Authority.

In Frankfurt, of course, the European Insurance and Occupational Pensions Regulator (EIOPA) is a reconstituted CEIOPS (the former Committee of European Insurance and Occupational Pensions Supervisors) with enhanced powers. And at the beginning of this year it announced its intention to double almost its staff, from 28 to 50.

Regulatory bodies also need granular knowledge of pension institutions, their goals, mission, modus operandi and everything in between. They also need the art of flexibility – to understand and adapt when olds rules are no longer fit for purpose. In devising a funding framework for pension funds separate to Solvency II, the European Commission and EIOPA will doubtless also be preparing to navigate future storms. But it would be wrong not to build a level of flexibility into the system, to ensure that institutions can take risk in good times and that they are not forced to sell risk assets at the same time as the herd in rocky periods, potentially condemning themselves to perpetual underfunding or costly sponsor bailouts.

Full article

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