There is no need for further measures on liquidity risks involving pension funds at European Union level, PensionsEurope has said.
Responding to a consultation from EIOPA on the supervision of IORPs’ liquidity risk management, the Brussels-based industry group said provisions in the IORP II directive “are sufficient”.
PensionsEurope also said that following up on proposed policy recommendations from the Financial Stability Board (FSB) risked adding further horizontal regulation for pension funds, which was not in keeping with the minimum harmonisation principle of the EU pension fund law.
In its consultation, EIOPA said that its draft opinion aimed to be consistent with the FSB’s proposed policy recommendations to enhance the liquidity preparedness of non-bank market participants.
PensionsEurope recently told the European Commission that pension funds should not be treated as non-bank financial intermediaries given their social role and how they are regulated.
In the feedback to EIOPA, PensionsEurope argued that, given the diversity of pension funds in EU countries, “it would be feasible only to examine at the national level where additional requirements are necessary”.
In its opinion paper EIOPA said national regulators should routinely monitor the liquidity risk exposures of the pension funds under their supervision, and assess their ability to manage these risks.
The European supervisory authority identified three possible sources of liquidity risks that warrant monitoring, but PensionsEurope disagreed with these, saying it was “not aware of sources of liquidity needs other than material margin and collateral calls on derivative positions that could qualify as material liquidity risks”.
Early withdrawals are not currently possible in most Member States, it said, and the transfer scenarios described by EIOPA “have much longer time horizons than variation margin calls which can result from derivatives”.
PensionsEurope also said it disagreed with EIOPA’s proposed definitions of “liquidity risk” and “material liquidity risk”, saying that to provide only these two categories “would announce that all IORPs would have significant liquidity risks”.
The industry group also told EIOPA that stress tests should only be demanded for pension funds with significant exposure to derivates and liquidity risks and that “we would disagree with any specifications of these measures at the European level”.
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