Pillar II fund shareholders call for immediate changes to OUG 114 after talks with Romanian decision-makers  

Shareholders of the Pillar II pension funds wrote a statement for the Romanian authorities on Tuesday where they claimed that of all the provisions of OUG 114, the new capital increase requirements of about EUR 800 million are a “huge, unjustified and unsustainable burden on the industry” and they called for the provision to be revised based on sustainable economic considerations, through real technical consultations between industry and authorities.

A recent BR analysis showed that the Pillar II private pension market risked being dismantled by the requirements imposed by OUG 114 as fund managers warned that they could leave Romania due to the new market conditions.

“The international majority shareholders of all the seven administrators of mandatory private pension funds (Pillar II) in Romania met in Bucharest to discuss with relevant authorities in the context of the major effects OUG 114/2018 has on this system,” according to the statement released by the APAPR, the association that represents all the seven private pension fund managers in Romania.

On March 5, the funds’ shareholders met with Finance minister Eugen Teodorovici, economic advisor to the PM Darius Valcov, Senate President Calin Popescu-Tariceanu, and Leonardo Badea, the president of the Financial Supervision Authority (ASF) as well as some of the members of the ASF Council.

“The fund managers’ shareholders explained that in the 11 years of existence of the Pillar II funds in Romania, they have had an impeccable performance, having invested most of the assets (over 90 percent) in Romania. The high but efficient degree of regulation, the high standards of transparency and the very good investment results obtained to the benefit of Romanian taxpayers were recognised by all the specialised international institutions.

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In both good and bad times, the companies that manage Pillar II kept their promises and fulfilled their social role for Romanians, while also contributing to the growth and improvement of conditions on the financial markets. The administrators’ and shareholders’ commitment to Romania has been solid and constant,” the statement reads.

According to the APAPR, OUG 114 introduces a series of significant changes to Pillar II, which “endanger the positive balance between all the parties involved”.

Of all the provisions of the emergency ordinance, the statement says, the new capital requirements of about EUR 800 billion are a “huge, unjustified and unsustainable burden on the industry” and “shareholders of the administrative companies see it as a step back from efficient pension reform in Romania”.

“At the same time, shareholders reconfirmed their interest in the diversification of the investment options, so that private pension funds could be even more involved in financing the Romanian economy, considering the participants’ interest. Industry representatives committed to exploring options to widen the investment universe, including by looking at best practices in the field in Europe and in the world, and will send this information to the relevant authorities.”

In the statement, APAPR expresses the shareholders’ hope that the dialogue with Romanian authorities would continue in order for OUG 114 to be changed based on sound economic considerations that would ensure the future development of Pillar II funds as well as re-establish trust on financial markets. They also urged decision-makers to make the necessary changes to OUG 114 as soon as possible.

At the end of the talks, which took place separately with each leader, Senate president Tariceanu said that “Pension funds are not sufficiently involved in the real economy. We looked for compromise solutions with their administrators to make them more involved.”

According to profit.ro, the expansion of investments that Pillar II fund administrators make using contributors’ money to less “conservative” categories is a demand that the PSD-ALDE government is making to the fund administrators in order to decrease their additional capital requirements imposed through OUG 114.