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Pension funds are first and foremost institutions with asocial purpose: they serve the sole purpose of providing retirement income to future European pensioners. They are responsible for occupational retirement provision and they contribute to the adequacy of pension treatments.
Pension funds are major investors in the European economy. The level of assets invested in the EU differs between Member States (e.g. for reasons of risk allocation and diversification and differences between pension systems) and ranges from 50% to over 75%. They mostly invest in high-maturity assets in order to match their long-term liabilities. European pension plans are managed on the base of the prudent person principle and they use OTC derivatives primarily to manage currency and interest rate-risks associated with their long-term liabilities.
Central clearing is an important piece of the G20 reform agenda, but it is funded by investors’ capital that cannot be directly invested in growth. PensionsEurope believes that a “one-size-fits-all” approach in EU financial policy does not work for pension funds, because they have in place specific business models and governance structures which significantly differ from those of other financial institutions. Pension funds are currently temporarily exempted from the clearing obligation of OTC derivatives.
Matti Leppälä, PensionsEurope’s Secretary-General and CEO, said: “We welcome the public consultation launched today and urge the Commission to work closely with pension funds in order to improve the regulation and to bear in mind that EMIR rules should not impose further costs on pension scheme arrangements as these would have a negative impact on the retirement income of future European pension beneficiaries.
Particular attention should be paid to the treatment of long directional OTC derivatives position of pension funds under EMIR. EMIR, with its high costs and fees, is currently not based on a system of risk of default. Without a fundamental review, pensioners (European tax payers) are expected to pay for a system that facilitates highly profitable private institutions to benefit substantially from mandatory clearing. But this system puts pensioners’ money at risk and pension funds may even become less safe as a result of EMIR”.
Joanne Segars, PensionsEurope’s Chair, added: “PensionsEurope calls on the Commission to develop solutions which would not penalise pension funds as they contribute to financial stability instead of posing systemic risks. This has been acknowledged by the Financial Stability Board and the International Organization of Securities Commissions recently in a paper on Assessment Methodologies for Identifying Non-Bank Non-Insurer Global Systemically Important Financial Institutions.”