Large cross-border pension funds would be better equipped to enter the lending market than their national counterparts, the European Insurance and Occupational Pensions Authority’s head of policy has suggested.

Speaking at the annual conference for the aba, Germany’s pension association, Justin Wray sought to highlight the benefits of a more unified, European pensions market.

Wray, who prior to joining EIOPA was head of pensions administration and governance at the UK Pensions Regulator, also spoke of the possibility of pension funds filling the gap left by the banking sector’s reduction in lending.

“It is not, of course, the case that pension funds can easily take the place of banks in areas such as infrastructure investment,” he said. “But it is important to consider that it would be easier for larger, pan-European pension funds to do so, with the benefits of scale. And the ability to acquire expertise would be easier in a genuinely European market than on a purely national basis.”

Wray noted that, as the number of schemes operating across national boundaries currently barely exceeded 80, it could not be argued they accounted for a significant number of the nearly 140,000 IORPs across the European Union.

“On that basis, not only is the number of cross-border IORPs very low, but what is perhaps of even greater significance is that the number has barely changed in the last five years,” he said.

“Whatever the ambitions of the first IORP Directive might have been to make easier cross-border pensions, we have to be honest and accept it has not succeeded.”

A number of pension investors have grown their exposure to loans since the 2008 financial crisis, with the UK’s East Riding Pension Fund recently telling IPE it expected the retreat of banks to last for up to 10 years.

Institutions across Europe have already been active in lending to small and medium-sized enterprises (SMEs), with the Irish National Pensions Reserve Fund a year ago investing €500m in three funds aiding domestic firms.

The €36bn Fonds de Réserve pour les Retraites in France last summer also confirmed it had committed €120m to an SME financing fund backed by the government and insurance industry, while the Danish pension association F&P recently struck an agreement with its government to promote SME lending among local pension funds.

Italy’s PensPlan, meanwhile, launched a fund investing in corporate bonds of SMEs in the South Tyrol region.

Topics