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.
Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager
Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.