Eight Pensionskassen fail German regulator’s stress test

Eight German Pensionskassen did not pass the German financial regulator’s stress test for 2016, BaFin has said.

BaFin said the eight schemes were smaller Pensionskassen – insurance-based occupational pension plans – and did not belong to the 40 largest in the sector.

The stress test examines how Pensionskassen would fare in four different situations involving short-term, adverse capital market changes. Last year seven did not pass the stress test, and the year before it was nine.

The eight Pensionskassen failed BaFin’s stress test because they did not pass all scenarios tested. The supervisor said they generally missed the required funding level by a small margin.

In total, 130 Pensionskassen (94%) were considered to have sufficient “risk-bearing capacity”, according to BaFin’s statement.

BaFin supervises 138 Pensionkassen. It excused 16 from taking part in the stress test because it considered their “risk-bearing capacity” to be assured as a result of them pursuing low-risk investment strategies.

A spokesman for BaFin said that Pensionskassen’s ability to bear risks had not changed significantly since last year.

In an introduction to the regulator’s 2016 annual report, BaFin president Felix Hufeld said that Pensionskassen were under considerable pressure from low interest rates and have already begun to take measures to strengthen their risk-bearing capacity.

Nearly all Pensionskassen have built up additional provisions, he said.

However, he warned that some might not be able to deliver promised benefits in full if interest rates stayed low.

According to statistics published in BaFin’s 2016 annual report, the average funding level at Pensionskassen was 131% and therefore in line with last year’s level of 132%.

As at the end of 2016, Pensionskassen in Germany had €155bn in assets, up 5% from 2015. BaFin said they remained mainly invested in investment units, bearer bonds and other fixed-income securities, as well as registered bonds and loans.

BaFin today said it would not disclose the names of the Pensionskassen and Pensionsfonds, nor those of the companies financing them, that are due to participate in EIOPA’s second stress test of EU pension funds.