RESULTS OF THE QUESTIONNAIRE ON SUPERVISORY STRUCTURES FOR PENSION FUNDS

1. RESULTS OF THE QUESTIONNAIRE ON SUPERVISORY STRUCTURES FOR PENSION FUNDS CENTRAL AND EAST EUROPEAN COUNRIES in 2001 Tibor Parniczky

2. Bulgaria FSC: http://www.fsc.bg (in 2001: SISA) • Hungary HFSA: http://www.pszaf.hu • Kazakhstan http://www.nationalbank.kz • Latvia FCMC: http://www.fktk.lv • Lithuania LSC: http://www.vpk.lt ISC: http://www.vdpt.lt • Poland I&PFSC: http://www.knuife.gov.pl • Slovenia SMA: http://www.a-tvp.si ISA: http://www.a-zn.si • Turkey Treasury: http://www.hazine.gov.tr CMB: http://www.spk.gov.tr • Slovakia FMA: http://www.uft.sk • Croatia HAGENA: http://www.hagena.hr

3. FUNCTIONS AND RESPONSIBILITIES • LEGAL MANDATES OF THE SUPERVISOR • POLITICAL AND INSTITUTIONAL INDEPENDENCE • FINANCING • TRANSPARENCY • HUMAN RESOURCES • ORGANISATION • CONCLUSIONS?

4. Functions and Responsibilities • In most CEE Countries there is a dedicated private pension supervisory organisation • In most cases integrated, except in Bulgaria in 2001, and in Croatia; where integrated, it is regarded as part of • financial market: Estonia, Hungary, Kazakhstan, Latvia, Turkey, Ukraine • Partially integrated • capital market: Lithuania (LSC), Slovenia (SMA) • insurance market: Poland, Slovenia (ISA), Lithuania (ISC, 2004), Czech Republic, Lithuania (ISA) • insurance and capital market: Bulgaria (2003), Slovakia (2004) • Divided supervision between two agencies, where • Ministries involved: Czech Republic, Slovakia, Slovenia • The pension funds model either investment funds or insurance companies: Slovenia, Lithuania • Pension fund and managing company are differentiated: Turkey

5. Functions and Responsibilities • The dedicated supervisor performs most of the functions • MoF or Tax authority is involved in qualification for preferences, and • collection (Hungary) • Central bank or Banking supervision oversees the custodian bank • which are, in fully consolidated cases, inside the same organisation • Public administration procedures regulate information exchange and secrecy in general. Where the are market specific rules, explicit cooperation exist in countries where • the financial market supervision is not /fully/ integrated • the pension supervision is parted between two agencies • Other cooperation with • Tax Authority • Central Bank • Office for Consumers Protection: Hungary • Social Security, Office for Consumers Protection: Hungary • Information exchange among board members: Poland, Turkey

6. Legal Mandates of the Supervisor • All CEE supervisory bodies are under the public administration procedures • All relevant resolutions are issued by the same body and might be appealed to the court (Administrative Court) for redress • Some of the supervisory bodies have regulatory power • As part of the general mandate of the parent organisation (central bank, ministry): Kazakhstan, Turkey • As special provision of the private pension or other legislation: Latvia, Lithuania, Poland … • HFSA would be willing to have the mandate and issues good practice notes

7. Political and Institutional Independence • The supervisory agency is a public administration office • under the Parliament, in some cases with control by the Government: Hungary, Latvia, Lithuania (LSC), • Under the Government as part of a Ministry or separate organisation: Bulgaria (SISA); Poland, Turkey, Lithuania (ISC) • Kazakhstan: under the President of the RK • The supervisory agency is • overseen by a body acting as a committee: Latvia and Lithuania (LSC, ISC, all leaders), Poland (leaders and other agencies), Slovenia, Turkey • or: controlled by a single responsible person: Bulgaria (SISA), Hungary • Consulting councils: Hungary, Bulgaria, Latvia, • Representation of the market/participants: Hungary, Latvia

8. Political and Institutional Independence • Appointment of the head of the supervision • Requirements for the post , except in Kazakhstan • higher education (the only requirement in Bulgaria) • experience in management • For 5-6 years, except in Bulgaria (SISA) • Deputies/directors are appointed by the competent body in: Hungary, Kazakhstan, Latvia, Lithuania • Deputies/directors are appointed by the Supervisor in: Bulgaria (SISA), Latvia (other members), Poland, Slovenia • Removal of the head of the supervision in most countries: • end of the term • resignation • cases of recall as established in the law, such as conflict of interest, incompetence, violation of rights of the supervised, or other rule of court • lasting incapability • on the initiative of the competent person or body: only in Bulgaria, Hungary (Parliament), Kazakhstan, Latvia

9. Financing • Self financing using supervisory fees • prescribed in pensions legislation - but still approved by the Parliament as part of the budget - in Hungary, Lithuania (ISC), Poland, Slovenia, Turkey • in Kazakhstan: completely separated • financed from general tax revenues in Bulgaria, Latvia (will be self-financed from 2007), Lithuania (LSC) • The national auditing office of public spending oversees the financial management Bulgaria, Hungary, Latvia, Lithuania, Poland, Slovenia

10. Financing * Please note the significant inconsistencies in the references!

11. Transparency • All supervisory bodies have a stated mission statement • Reporting by the supervisory body Annual and quarterly reports, based on statistics and research of the market, are common • To the controlling body • To the public / website • Examples of disclosure policies • Resolutions of the supervisor on cases (in Hungary), decisions of the governing body (in Latvia) are published in the official paper, on the internet • Regular press conferences (Slovenia, Turkey)

12. Human Resources • Employees are civil servants • Migration between public and private sector is not restricted, nor specially regulated for pension funds • Except restriction of misuse of gained insider information: Latvia, Turkey • General rules: Lithuania and Poland: one year • Remuneration • Flexibility, Corporate culture:  • Comparable salaries with the market: in most cases, but Bulgaria • Experience in migration is occasionally to never • Recruitment • Main source: public administration – predecessor organisations • Second: graduates and academics • Training programs • Internal programs; Public Administration courses • International conferences, seminars and study tours - INPRS • Direct USAID and agent organisation projects • European Commission programs

13. Organisation • Legal – supervisory – corporate services and administration sections/functions segregate • On-site and off-site supervision is differentiated mainly in consolidated supervision, especially if the structure is defined according to functional lines • Number of employees on different fields and professions – especially for actuaries – greatly spread country by country

14. Conclusions? • Integrated supervisions commend the advantages of consolidation • The CEE Supervisors deem the pension supervision legislation adequate – saved minor past/future amendments • Similarly conceive of their financial resources – except central budget financing

15. Conclusions? • All in all, there aren’t much problems with the supervisory framework … • Except in Slovenia • …however there are several plans and actual developments of supervisory structures throughout the Region • Lithuania: CM and Insurance supervisions will cooperate • Czech Republic: Insurance and Pension Supervision Department of MoF will become independent organisation • Slovakia: Financial Market Agency will take over pension supervision • Hungary: change for controlling board instead of advisory council • Poland: merger with Insurance Commission • Bulgaria: consolidated financial market supervision

16. Thank you! Tibor Parniczky parniczky.tibor@chello.hu http://www.inprs.org