European Pensions Supervisor Eyes Larger Role

(November 21, 2012) — The chairman of the body responsible for supervising European pension funds and insurance companies has revealed plans for the group to become more powerful on the continental scene.

Gabriel Bernardino told attendees at the European Insurance and Occupational Pensions Authority (EIOPA) second annual conference in Frankfurt, Germany, today that the organisation’s remit should be expanded.

“In the pensions area EIOPA’s mandate only covers occupational pensions, the so-called second pillar. However, I believe that the implementation of the European Union agenda for adequate, safe and sustainable pensions calls for a sufficient level of regulation and supervision of personal pensions, the so called third pillar. Consequently, EIOPA’s mandate should be extended to all third pillar pensions,” Bernardino said.

He admitted that in the short term EIOPA already had a lot of work to do, examining how Solvency II regulations should be applied to pension funds and insurance companies, and assessing potential threats to the stability of the financial system.

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However, he added that even to comply with its original remit would mean enlarging the organisation and its right of entry to relevant parties.

“In order to perform this independent assessment in a transparent, efficient and risk-based way, EIOPA needs to reinforce its human resources, should have access to the relevant individual information available to the national supervisors and also have direct access to the individual institutions,” he said.

The bulk of the chairman’s speech dealt with issues around Solvency II, for both insurance companies and pension funds.

Bernardino said the organisation was creating a “supervisory handbook” to help those affected by the regulation to be clear on best practice in implementing it.

He slammed European regulators for postponing the launch of the regulation earlier this year: “Solvency II has been viewed internationally as a reference in risk-based regulation of insurance. In that sense many countries have considered elements from Solvency II while developing their own regimes. The lack of certainty about Solvency II implementation is challenging the EU credibility in the international discussions.”

Bernardino also sought to pacify qualms about the implementation of Solvency II on pension funds, telling conference attendees that EIOPA was hard at work with a Quantitative Impact Survey (QIS).

“The QIS exercise aims to assess the financial impact on institutions for occupational retirement provision (IORPs) of valuing assets and liabilities in the holistic balance sheet and introducing a solvency capital requirement under various policy options of the EIOPA’s Advice. We expect to finalize the report on the QIS findings in spring 2013.”

The chairman signed off thus: “As Bob Dylan so nicely [sang]: The times they are a’changin’.”

For the full speech, click here.

(November 20, 2012) – The wave of dissent against company remuneration packages in the early part of this year may have been no more than a blip and failed to ignite a push towards corporate governance among investors in the United Kingdom a study has revealed.

Non-profit organisation FairPensions found that the rumblings that some classed as an uprising against poor corporate governance in the spring of 2012 was greatly overstated. The organisation surveyed some of the largest asset managers and institutional investors in the UK and said its findings were “disappointing”.

“It now seems clear that isolated rebellions did not translate into higher levels of dissent across the board. Analysis by PIRC of a sample of 300 AGM results for FTSE All-Share companies in the first two quarters of 2012 shows that the average vote against remuneration reports was 7.64%, compared to 6.4% in 2011,” the FairPensions report said. “The notion that 2012 saw a significant and widespread jump in shareholder dissent on pay does appear to be a myth.”

A series of CEOs stepped down after remuneration packages shareholders felt were excessive were voted down. Drugs giant AstraZeneca and newspaper group Trinity Mirror lost their leaders, while others were forced to give up large pay and bonus arrangements.

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However, the report said there was no pattern in votes against remuneration packages in the early part of the year – it even suggested there could be a correlation between how well a company’s share price was doing and the likelihood of a vote against relatively generous remuneration packages.

“Whilst remuneration reports clearly need to be considered on a company-by-company basis, the waving through of reports with components widely considered as bad practice needs to be explained,” the report said.

Nor was there consistency from asset managers, who are usually responsible for filing the votes on behalf of their investor clients, the report said. These fund managers showed wide variability between what they would vote for and against, and as a community, there appeared to be little agreement on what constituted poor governance practices.

“There also appears to be significant variability in willingness to challenge management, with some large UK asset managers appearing reluctant to vote against remuneration reports even at companies which suffered large revolts,” the report said.

This week shareholders in mining giants Glencore and Xstrata voted in favour of a merger between the two companies, but did not agree to a “golden handcuffs” remuneration package. The director responsible for the proposal resigned soon after the result of the vote was announced.

Conversely, the largest owner of listed shares in the world, the Norway Pension Fund-Global announced this week that it was going to be a more active in lobbying for better corporate governance on behalf of smaller investors.

For the full FairPensions report click here.