Guus Warringa, board member and chief counsel, legal, tax, regulations and compliance at APG Asset Management, talks to Chris Panteli about fighting a one-size-fits-all approach to regulation and encouraging other pension funds to speak up for their interests
Chris Panteli: How is regulation affecting APG?
Guus Warringa: There is a lot and it is coming from all sides. There’s a lot of political pressure since the crisis in order to avoid future crises and legislators seem to think they can solve this by having more rules. That’s not necessarily a bad thing, but the whole process is quite politicised on both sides of the ocean; we’re such a big player, what happens in Washington is very relevant too. Of course we have to focus on Brussels, being based where we are.
Chris Panteli: How are you dealing with that?
Guus Warringa: We should be very much trying to be in the driver’s seat and that’s what we’ve been trying to do at APG. So far we have been successful, but the difficulty is there are so many pieces of legislation going on even the legislators don’t seem to have a complete picture of the whole puzzle.
Chris Panteli: Which issues have you been successful in?
Guus Warringa: The main issue was the EMIR (European Market Infrastructure Regulation) legislation on over-the-counter derivatives. APG had a very intensive lobby together with our Dutch peers and the Dutch Pension Fund Association to make sure pension funds were exempt from the EMIR rules. We have succeeded in that – as matters currently stand. The process is not yet finalised but in the latest draft from Parliament we will be exempt for four years.
Chris Panteli: What were your main concerns?
Guus Warringa: Pension funds are extremely solvent; due to this creditworthiness we don’t post an initial margin, just a variation margin in a form we choose. It’s almost inconceivable that a pension fund would go bankrupt. Under the new rules originally proposed, the idea was that the whole financial sector had to put up a margin in certain forms. We are a heavy user of derivatives, like all liability driven investors are; you can find them in the UK and Netherlands mainly. We all use derivatives to hedge our liabilities, so we are taking away risks (we hedge), not creating them – there is no need to regulate us in the first place as we are not bringing risk to the market.
Under the original proposals, we had to put an initial margin and as a sector you’re talking about billions and billions. That’s simply money in, money out – you can’t use it. Another thing is you’ll have an exposure to the central counterparties (CCP) or a clearing member, which we don’t currently have and don’t like the idea of running any risk on any bank because, as we know, not all banks are that safe.
The Pension Protection Fund (PPF) is consulting on proposals to charge a "risk reflective" levy for commercial defined benefit (DB) consolidation vehicles.
The funding gap across FTSE 350 schemes could be slashed by as much as £275bn if schemes look beyond traditional ways of creating value. Victoria Ticha examines how
There will be "many flavours" of defined benefit (DB) consolidators but consolidation will only be the right answer for a minority of schemes, Alan Rubenstein says.
Work and Pensions Committee (WPC) chairman Frank Field has questioned the regulator on what lessons it can learn from the experience of the Kodak Pension Plan No.2 (KPP2).