Asset pooling

epn has an interesting story�mostly about the competition between asset pooling locations in Ireland, the Netherlands and Luxemburg. The Belgian approach with its relaxed solvency regime gets bad marks, especially with regards to next year's Commission review of the Directive and its transposition.�

Mediation mechanism for supervisors

CEIOPS invites comments on its Consultation paper to establish a non-binding mediation mechanism available to supervisory authorities under the directives within the Committee's purview. The mechanism is proposed to work with an accept or explain approach, thus forstering transparency. However, the issue that might be considered to be most in need of mediation (i.e. different funding requirements in Belgium and the Netherlands) appears not to fall within the scope of the mechanism.

39 cross border IORPs

Already in early March, CEIOPS reported the status of cross-border IORPs that were active by the end of January 2007. For some reason, this has escaped our attention to date, which is quite unforgiveable since it is an interesting statistic.

Of the 39 institutions reported, 77% have been in operation prior to the Pensions Directive's entry into legal force. Only 9 are "new" IORPs, located in Finland (1), Germany (1), Ireland (4), Luxemburg (1) and the UK (2). Notably absent from that list are Belgium and Liechtenstein, but we would wager that the "many new cross-border IORPs" anticipated by CEIOPS should change that ranking fairly soon, especially since Belgium is a relatively late arrival in terms of directive transposition. We hope that this statistic is updated periodically, for instance quarterly.

CEIOPS also notes that the Budapest Protocol of supervisory cooperation works well, but that "some features of the IORP Directive might benefit from further clarification".

Regulatory distortion

IPE refers us to an interesting OECD study modelling the optimal asset allocation for an identical pension fund, over a 30-year period, according to the regulations of five OECD pension jurisdictions. It found an identical pension fund which was fully funded according to UK standards would appear 87% funded in the Netherlands and 69% funded under German rules. Optimal asset allocation strategies also differ between the jurisdictions. Since good regulation should at least attempt to not distort economic reality, this certainly looks like an interesting paper.

War on regulatory arbitrage?

As indicated earlier, some stereotypical anti-competitive reflexes begin to rear their ugly heads in the wake of the open conflict between Belgium and the Netherlands on pensions regulation. The President of DUFAS asks for a war on regulatory arbitrage, which can be translated into war on competition, of course. This brings the Pensions Directive to a critical juncture in its application relatively early on - here's to hope that the Commission will handle this diligently.

One is tempted to refer the Dutch back to the basics of the Cassis de Dijon principle and following jurisdiction. Applied na?vely to IORPs and the Pensions Directive, that principle would entail that the set of regulatory norms (for instance lower solvency) deemed sufficient by one member state's authorities needs to be recognised by every other member state (with the famous exception of measures required for the "effectiveness of fiscas supervision, the protection of public health, the fairness of commercial transactions and the defence of the consumer", of course).

Therefore, regulatory arbitrage is part & parcel of the Pensions Directive. The only alternative is harmonisation of occupational pensions, and that is what member states shied away from at the inception of the Pensions Directive.