EIOPA Launches Occupational Pensions Stress Test Exercise for 2019
EIOPA launched its biennial stress test of the occupational pensions sector in EU. The published documents include Institutions for Occupational Retirement Provision (IORPs) stress test specifications, reporting templates, response templates, calculation tool, supporting spreadsheets, and adverse scenario for the EU-wide pension fund stress test in 2019. Participating IORPs must complete the exercise and submit results to the relevant national supervisory authority by June 19, 2019.
This exercise is expected to allow important and relevant insights into the resilience and potential vulnerabilities of the European occupational pensions sector. For the first time, a European stress test includes an assessment of Environmental, Social, and Governance (ESG) exposures.The core assessment refers to the direct impact of a stressed market scenario on the sustainability and funding of Defined Benefit pension funds and on the projected future retirement income of members of Defined Contribution (DC) pension funds. Developing further the methodologies and approaches used for previous exercises, the 2019 stress test has been complemented to assess pension funds' potential reaction to the adverse market scenario on their investment allocation, to understand better possible conjoint investment behaviors that may be relevant for the stability of the financial markets. Also, the effects of conditional cash in- and out-flows, which may mitigate or amplify the effects of the adverse market scenario on Defined Benefit pension funds, can be assessed following an enriched cash flow analysis.
For the 2019 exercise, EIOPA decided to add an analytical component to focus on pension funds' current exposures and risk management practices regarding ESG factors, which will provide a relevant starting point for ESG-related financial stability assessments of the European financial sector. Addressing stakeholder feedback, the 2019 Occupational Pensions Stress Test has been initiated on an expeditious timeline to allow pension funds significantly more time to conduct the exercise and for national competent authorities to evaluate the results. A dedicated questions & answers (Q&A) process with timely publications and a centralized validation procedure will further enhance the practicability and quality of the exercise. The results and conclusions of the stress test are expected to be published by the end of 2019.
Related Links
Keywords: Europe, EU, Insurance, IORPs, Defined Benefit, Defined Contribution, Stress Testing, ESG, Occupational Pensions, EIOPA
Featured Experts
Jun Chen
A well-recognized researcher in the field; offers many years of experience in the real estate finance industry, and leads research efforts in expanding credit risk analytics to commercial real estate.
Anna Zabrodzka
Economics thought leader focusing on macroeconomic analysis and forecast assumptions for the EMEA region.
Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.
Previous Article
OFR Paper Examines Effects of Volcker Rule on Corporate Bond TradingRelated Articles
EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
MAS Amends Notice on Related Party Transactions of Banks
MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.
ECB Amends Guideline on Euro Short-Term Rate
ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.
EBA Consults on Standards Related to FRTB-SA
EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).
PRA Proposes Rules Related to IRB Approach for Credit Risk
PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.
BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK
The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.
FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks
FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.
OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks
OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.
EU Amends CRR and Securitization Regulation in Response to Pandemic
To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).
HM Treasury Announces G7 Agreement on Green Agenda Ahead of COP26
HM Treasury announced that G7 Finance Ministers and Central Bank Governors met ahead of COP 26, the 2021 UN Climate Change Conference, and agreed on green agenda.
