Stress Tests – Pension Companies
FMA Priorities for Supervision: Stress Tests – Pension Companies
The supervisor’s main objective is to protect the rights of members and beneficiaries of occupational pension schemes and to ensure the stability and soundness of institutions for occupational retirement provision (IORPs). Irrespective of this objective, in performing its duties, the Austrian Financial Market Authority (FMA) is required to consider the potential impact of its decisions on the stability of the financial system in all Member States within the European Economic Area (EEA) and, in particular, in emergency situations, based on the information available at the relevant time. In times of exceptional movement in the financial markets the FMA shall take the potential procyclical effects of the measures that it deploys into account. Stress tests, which the FMA conducts on a regular basis, are one such instrument. In a stress test pension companies are required to simulate how their business performs in particularly unfavourable scenarios. Such scenarios may include sharp declines in the capital markets, cyber attacks, liquidity shortages or significantly increased costs. Based on such scenarios defined either by the FMA or the European Insurance and Occupational Pensions Authority (EIOPA), the FMA is able to estimate the extent to which pension companies are able to continuously fulfil their obligations, even in adverse situations. Where applicable the supervisor may require individual undertakings to take measures to increase their resilience.
