What Lies Beneath: The hidden cost of pension fund equity risk

Abnormal Vol

wharf-monster2 (6)

Read the full paper here

update, this paper was quoted in a front page article in Financial News in the weeks of 7th April 2014. The online version can be found here

A recent change to the banking regulatory landscape brought pension risk
to the fore…

On 29th November 2013, following a consultation, the Prudential Regulation Authority, responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers and major investment firms, announced[1] changes to the capital framework applying to UK banks and building societies, specifically with respect to defined benefit pensions risk.

The PRA has decided that firms should meet all Pillar 2A risks (5), including pension risk, with at least 56% CET1 capital from 1 January 2015 onwards. This matches the proportion of CET1 capital required for Pillar 1. In its consultation the PRA asked for views on whether Pillar 2A should…

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