Banking, insurance sectors to speed pension fund consolidation
Recent changes in the nation's banking sector are set to force ownership changes and possible consolidation in the new private pension fund sector, but industry watchdogs say the money is safe and they're monitoring those changes to ensure competition.
Currently 21 private pension funds are licensed to operate as part of the nation's reform of its traditional pay-as-you-go social security system to a private, capitalized retirement savings plan. Social security specialists envision the number of pension funds eventually to drop by half to less than a dozen, as major players emerge building capital from individual subscribers and market-driven mergers and acquisitions among funds.
But the capital-building stage is still in its infancy and many market watchers said it would be another six months before funds know who has what and the market-driven consolidation period gets underway.
But laws governing pension fund ownership and changes in shareholder structure in the banking sector are likely to force the hand of the consolidation process. Under the new pension system, a company, either directly or through companies in which it holds at least a 20% stake, can be a shareholder in only one Powszechne Towarzystwo Emerytalne (PTE), which runs a pension fund.
Recent and proposed mergers and acquisitions of stakes in banks and insurance companies, however, are set to establish cross shareholdings and run counter to those guidelines. To come in line with the pension fund rules, banks and insurance companies will either have to sell or merge their separate fund holdings, according to industry members and watchdogs.
While much has yet to settle out in terms of fund ownership, the change could keep fund management in a state of flux during the near term, industry members said.
But pension fund watchdog Urzad Nadzoru nad Funduszami Emerytalnymi (UNFE) said individuals had little to worry about, savings are insured and there is no fear of going too far with consolidation where the benefits of competition among funds is lost.
"There will be no merger without the office's consent," said Sebastian Bojemski, UNFE's spokesman. "We have been saying for some time now that the concentration on the market is very high and the market will not function properly if there is no competition in it."
The first funds likely to be affected are No. 1 Zlota Jesien with more than 1.5 million fund members and smaller funds with fewer than 500,000 members, ego, Bankowy and Skarbiec funds.
Zlota Jesien was launched as a fund wholly owned by insurer Powszechny Zaklad Ubezpieczen (PZU) through PTE PZU which runs the fund. But last month, Eureko, a holding of seven insurance companies based in Amsterdam, purchased a 20% stake in PZU. Eureko, however, also holds 45% of PTE BIG BG, which runs ego. The remaining shares of ego are held by BIG Bank Gdanski (BIG BG).
Shareholders are currently debating trying to figure out whether to buy, sell or merge their stakes. PTE BIG BG is considering all options for its ego fund and Zlota Jesien, said Mariusz Dabkowski, new president of PTE BIG BG. "If the merger of the two funds is the best option, we will do it," he said.
BIG BG still has a six-month deadline for its decision, and nothing should happen earlier than that, said Wojciech Kaczorowski, BIG BG spokesman. "What we can do is either to sell shares or withdraw completely. I mean, either Eureko or PZU, might have to do that," he said. "But, on the other hand, laws tend to change, so maybe one should wait, if such a situation happened once, it may happen again."
UNFE downplayed any wiggle room on interpretation. "The current regulations are sufficiently precise on that question," said Bojemski of UNFE. "They have six months to line up with the regulations."
But, Zlota Jesien and ego may not be the only funds up against a deadline. If the merger of two Polish banks, BRE and Handlowy comes into effect, that will also likely force Skarbiec and Bankowy into play.
BRE Bank, together with STU Hestia Insurance, set up PTE Skarbiec Emerytura, which runs the Skarbiec fund. Handlowy, together with PKO BP, established PTE PKO/Handlowy, which runs Bankowy.
It's too early to speculate on the future of Skarbiec, said Krzysztof Telega, chairman of Skarbiec's managing board. (At press time, Handlowy shareholders had not voted on a merger with BRE.) "In economic terms it would be better to merge the two funds but other reasons may prevail."
In market terms, it's too early to consolidate, Wojciech Kaczorowski agreed. "We need at least half a year to verify lists of customers at pension funds and only then do we know the quality and the number."
Analysts are forecasting that more than 8 million people will subscribe to the pension fund scheme, but any accurate measure won't take place before mid-2000, they said. According to figures provided by pension funds, only three recruited more than 1 million members.
Pension funds generally are looking longer term, building financial and market strategies over the next few years, industry members said.
"But, the new division of the market is to be a two-to-three-year process," said Krzysztof Lutostanski, chairman of Bankowy's managing board. "It's not going to be next year because it's impossible yet to assess the value of pension funds."
