HBS would allow pension funds to operate across borders while running a deficit.
Cross-border funding rules for European pension funds could be relaxed by using the harmonised holistic balance sheet model.
Current rules stipulate that cross-border schemes must always have enough assets to match liabilities. Plans to encourage the growth of cross-border pension funds among multi-national companies have suffered, as they pose too much capital risk for corporate sponsors. However, the HBS as envisaged by EIOPA would impose solvency requirements or minimum funding levels, or act as a risk-management tool. Bernardino said a harmonised system across the EU would allow cross-border funds to be in deficit, as long as they complied with the HBS framework.
Gabriel Bernardino, EIOPA's Chairman, said the risk-management tool would come with some funding consequences.
The idea of solvency requirements for pension funds was initially expected to be included in the IORP II Directive, before being dropped by then commissioner Michel Barnier, after protests from several governments. However, the idea lived on, with EIOPA working on the HBS outside European Commission influence. “There is an intrinsic value in the work EIOPA is doing,” Bernardino said. “Cross-border pension funds highlight the true nature of the European internal market. If we move towards a sufficient, minimum level of harmonisation on technical provisions or solvency, we can have a better consistency and convergence, and there will be huge cost benefits.”
The consultation runs until 13 January 2015.
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