INPRS
INPRS
INTERNATIONAL NETWORK OF PENSION
REGULATORS AND SUPERVISORS
Regulation of
pension fund governance in
CEE Countries
Tibor Parniczky
CEE Regional INPRS Seminar
Ljubljana, Slovenia - November 2002
INPRS
Country Experience Reports
on Pension Fund Governance
• Regulation on governing bodies of pension
funds
- Definition of governing and control entities ;
• Bulgaria
Identification of the governing body ; • Czech Republic
Suitability and accountability rules ;
Composition of the governing bodies ; • Estonia
Operations of the governing body ; • Hungary
Appointed internal and external
professionals ; Controls for Delegation of • Latvia
duties of the governing body ; Transparency
of governance, reporting
• Poland
• Supervision of governing bodies of the • Slovak Republic
pension funds • Slovenia
– Supervision of the pension fund governance
regulation ; Supervisory guidelines and
recommendations
INPRS
Institution of pension fund
• Special/exclusive purpose pension fund and pension
fund management entities
– In most countries financial institution, joint stock company
with special licensing obligation
– Sui generis legal entity: in Hungary and Slovak Republic
– Non-profits: Slovakia, Hungary, Latvia,
in Poland: voluntary employee society
– Open/Closed: Hungary, Latvia, employee society in Poland
– Slovenia: Two forms
• Similar arrangement for voluntary and mandatory
(where exist)
– With differences in some details
INPRS
General governance structure
– Administrative/Management Board
– Supervisory/Controlling Board/Council
– General Assembly of shareholders or members
• Plans and funds
– Bulgaria: One administrator – max four forms of plans:
Universal – occupational – voluntary – investment voucher
– Hungary:
• Voluntary and Mandatory funds in one plan
• Multiple SIP funds in one voluntary plan
• Funding document
– Joint stock company : Articles of association
– Separate Pension plan(s) document: Estonia, Latvia, Czech
Republic
– Hungary, Slovak Republic: Statute and Benefit Plan
INPRS
Election – representation
• Poland:
– Management Board: open fund: General Meeting
Employee society: Supervisory Board
– Supervisory Board of Employee societies: includes member elected
representatives
• Latvia:
– Council: elect and recall members of the BD
– In closed funds: council might be substituted by plan committee(s):
equal representation
• Slovak Republic:
– Employers and employees organisation
– Policyholders and beneficiaries representation
• Bulgaria: Employers and trade unions in the Trustee Board
• Hungary: Complementing representation rules for voluntary
and mandatory
INPRS
Functioning of the governing body
• In most cases only general resolution making rules
on the bases of the applicable company law
• Poland: based on self-regulation
• Estonia, Latvia: MB regularly reports to SB
• Hungary: regular meetings, election and
withdrawal rules
INPRS
Liability and statement of due diligence
• Poland: Society per se to the members
• Latvia, Czech Republic: BD jointly
• Bulgaria: Company to members, Board to
company
• Estonia, Hungary: members of the MB and SB
• Due diligence
– E.g. in Estonia, Hungary, Czech Republic
– Bulgaria: Both towards members and shareholders
INPRS
Suitability and accountability rules
• Clear criminal record
– Usually restricted offences related to management
• Degree in higher education
– Usually economics or law
– Poland: part of the Board members
– Chairperson, members and Executive employees
• Management capabilities: experience and good
reputation
• Not falling under conflict of interest rules
INPRS
Conflict of interest rules
• Ownership in related and affiliated companies
• Plus
– Poland: National Investment Fund
– Hungary and Czech Republic : MPs and other leaders
of state organisations
• Latvia: state of BD members’ conflict of interest
must be revealed in advance
INPRS
Appointed professionals
• Custodian: mandatory
• External auditor: mandatory
Except in the Czech Republic
–
– Independent internal auditor: e.g. in Bulgaria, Estonia,
Hungary
• Actuary : Bulgaria, Hungary (mandatory – voluntary: different)
• Poland : External asset management: only in employee
societies
• Latvia:
– Only licensed financial institutions,
– Independent only for closed funds
• Bulgaria : Investment intermediary
• Specialised services : Poland: Transfer agent
INPRS
Disclosure
• Poland – open funds
– Members: offering circular+latest semi-annual financial statement;
individual account and investment performance information
– Supervisor: offering circular +latest semi-annual financial statement,
annual report; daily-, monthly-, semi and annual asset composition
reports
– Public: offering circular
• Estonia:
– Members/Public: Semi annual and Annual Reports including NAVs
– Supervisor: Monthly, Quarterly, Semi- and Annual Reports
• Latvia
– Members: individual account information, SIP, appointed service
providers
– Supervisor: Quarterly reports, SIP
INPRS
Disclosure – contn’d
• Czech Republic
– Members: According to statutes, annually
– Government: for state contribution: quarterly, reporting: (semi-) annually,
also to the depository
• Slovak Republic:
– Individual information: annually
– financial plan + annual report
• Bulgaria
– Individual account and financial report: free of charge: once a year
– Supervision: monthly-quarterly-annual reporting
• Hungary
– Individual account information, SIP, access to all relevant records
– Supervisor: daily asset information, quarterly-annual reports, actuarial
data, SIP
– Public: annual disclosure - detailed
INPRS
Supervisory techniques
• Licensing and inhibition of leaders and executives
• Fines: usually applicable to the managing entity
– But: Hungary, Estonia
• Calling of meeting of the governing bodies
– E.g. in Poland, Hungary
• Check of internal regulation and control system of
governing bodies in accordance with
organisational structure – mainly on-site
– E.g. Latvia, Bulgaria
INPRS
Guidelines and recommendations
• In newly implemented systems:
– rather specific and consultative answers than universally applicable
interpretations
• Poland: specific cases
– Main areas: fees, investments, disclosure requirements and transfers
between funds
• Latvia: recommendations
– Risk management and control systems, money laundering
• Bulgaria
– Publication of Supervisory Manual
– Recommendations: reactive
– Corporate governance manual: planned
• Hungary
– Included in the Law on HFSA: according to workplan