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EU long term finance and IORP proposals

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On 27th March 2014, the EU published two important, related proposals that will have a long-term impact on investment. These are the outcome of the green paper on long-term investment published a year ago and the updated draft of the pensions directive (IORP).  

 

The long-term investment proposals are summarised in this Q&A published by the EU that you can dowload here:

 

The proposals draw together a number of other regulatory provisions. The Solvency II consequences were already addressed in December.  The provisions published yesterday set a timetable for other regulatory provisions.

 

Our comments on the timetable can be found here

 

Our comments on the provisions more generally can be found here:

 

The timetable includes a commitment to complete the IORP Directive during the second half of 2014. The EU also published an updated draft of the IORP Directive yesterday.

 

Our comments on the IORP Directive can be found here:

 

Two crucial points in respect of the Directive are worth noting:

 

i)   The previous draft had incorporated the Solvency II capital requirements. Last year, it was announced that these were being delayed for IORP. The current draft drops entirely the idea of an EU wide capital requirement, instead leaving this to local regulators. The wording does imply that this might be revisited later.

 

ii)   The Directive does include governance and risk management requirements that will have a knock on effect on service providers. Our previous comments on independent audit of controls environment for investment managers with life insurers as investors under Solvency II will be equally applicable for those with pension funds. Our previous comments can be found here.

 

The EU Long-term Investment Funds proposals passed their EU Parliament first reading on 16th April, details here.

 

Our general Solvency II and IORP materials are here