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Institutions for Occupational New prudential regime

Pension Funds Directive (IORP II) for investment firms

Background Some key provisions Background The Investment Firm Directive (IFD) and Investment Firm Regulation (IFR) were
published in the Official Journal of the EU on 5 December 2019 and entered into
- The annual Pension Benefit Statement: a standardised core informa- force 20 days later.
In December 2016, the Directive tion statement introduced by the Directive includes the personal details of On 20 December 2017, the
the member, information on pension benefit projections, or a breakdown of The new rules introduced by this “Investment Firms Prudential Package” aim to
on the activities and supervision European Commission published
the costs deducted by the IORP at least over the last 12 months. create a more tailored prudential regime for investment firms, by reducing the
of institutions for occupational a proposal for a Regulation on
number of categories of investment firms with regard to the prudential regime
retirement provision (IORP II) was EIOPA has been working on the IORP information requirements and pub- the prudential requirements of applicable from 11 to 3 and by moving away from the current system where all
lished a report on the Pension Benefit Statement - guidance and principles
adopted. It entered into force investment firms and a proposal investment firms are subject to the same capital, liquidity and risk management
based on current practices- in November 2018 and another report in March
in January 2017 and Member 2019 on: “other information to be provided to prospective and current mem- for a Directive on the prudential rules as the banks: the CRD/CRR regime.
States had until 13 January 2019 bers - guidance and principles based on current practices”. supervision of investment firms.
The new categories concern:
to transpose it into national law. The Capital Requirements 1. large firms (“class 1”): they remain under the scope of the existing CRD/CRR
- The Directive includes rules regarding cross-border transfers of pen-
Occupational pension funds or sion schemes and aims at promoting such transfers. Member States shall Regulation (CRR), which foresees prudential rules, and the most systemic ones will be brought under the same
allow transfers of all or a part of a pension scheme’s liabilities, technical provi- supervisory regime as significant credit institutions;
Institutions for Occupational different Commission’s reports on
sions, and other obligations and rights and the corresponding assets or cash 2. other firms (large but “non-systemic”) (“class 2”) have to comply with a more
Retirement Provision (IORPs) equivalent to a receiving IORP. Regarding such cross-border transfers, BIPAR prudential rules, is at the origin of limited set of prudential requirements than class 1 firms. They fall in class
are financial institutions which has always maintained that there is a need to ensure that pensions can be this workstream. The Council of the 2 when they exceed certain thresholds (for e.g. balance sheet, client orders
issued cross-border. BIPAR, however, pointed out that cross-border provision handled, assets under managements, etc);
manage collective retirement EU and the European Parliament
of pensions, especially occupational pensions, will not be achieved as long 3. small firms with “non-interconnected” services (“class 3”) that do not exceed
schemes for employers, in order as the regulation in several Member States is fragmented. These differences both amended the proposal and the thresholds, will have simpler and more streamlined requirements.
to provide retirement benefits extend across the likes of tax, employment law and social aspects. the European legislators found

to their employees (the scheme agreement on a compromise text The texts contain rules on the initial capital of investment firms, the supervisory
In November 2018, EIOPA published a Decision to strengthen the cross-bor- powers and tools for the prudential supervision of investment firms by competent
members and beneficiaries). der collaboration between National Competent Authorities on cross-border in early 2019. The Directive and authorities and the publication requirements for competent authorities in the field
activities with respect to the IORP II Directive.
Occupational pensions, which the Regulation are expected to be of prudential supervision of investment firms.
include an employer contribution, - The Directive does not concern issues of national social, labour, tax published in the Official Journal in

are known as the “second pillar” or contract law, or the adequacy of pension provision in Member States. the near future. They also deal with remuneration policy and practices and with how providers
based in non-EU countries can offer their services to EU companies and clients.
of pension systems. The IORP
Transposition status
II Directive aims to ensure the BIPAR and its working party have The texts strengthen the equivalence regime that would apply to third country
soundness of occupational In October 2019, 16 Member States had fully transposed the Directive; been following this dossier from the investment firms, setting out in greater detail some of the requirements for giving
Infringement proceedings are pending against 17 Member States. them access to the single market and granting additional powers to the Commis-
pensions, to better inform pension start, responding to Commission
sion.
scheme members and beneficiaries EIOPA work and EBA consultations, taking
with a standardised “Pension part in stakeholder meetings Early June 2020, the European Banking Authority EBA outlined its roadmap for the
On 27 March 2020, EIOPA published two model Pension Benefit Statements. implementation of the rules and launched 4 public consultations on level 2 pru-
Benefit Statement” at EU level, to These are intended to provide practical guidance on how to implement the and liaising with the different dential, reporting, disclosure and remuneration requirements.

promote cross-border activity and annual information document that IORPs are required to send to their mem- policymakers. In this respect, BIPAR
bers following the implementation of the IORP II Directive. These models are supported proportionate rules and
to help long-term investment by The roadmap outlines the EBA’s work plan for each of the mandates laid down in
voluntary and may be further developed and adapted to the national speci-
encouraging occupational pension ficities and/or characteristics of each pension scheme. regretted that the texts remove the the IFR/IFD and clarifies the sequencing and rationale behind their prioritisation.
funds to invest long-term in growth-, possibility for certain (small) firms EBA will deliver on its IFR/IFD mandates following a four-phased approach running
EIOPA also carries out periodical stress tests for IORP. The latest was pub- from 2020 to 2025.
environment- and employment- to substitute capital requirements BIPAR notes that for the guidelines to specify the criteria when exempting small
lished in December 2019 and was designed to assess the resilience of the
enhancing economic activities. European occupational pensions sector to an adverse market scenario using by PI cover (or having lower capital firms (“Article 12(1) firms”) from the liquidity requirements, there is no legal dead-
common methodologies. It also analysed how IORPs transfer shocks, result- requirements in case a firm has PI line, but EBA schedules this in its roadmap for phase 4 (between December 2021
ing from the impact of the adverse market scenario, to the real economy and cover). and June 2025), and more in particular for June 2022.
financial markets.

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