Romanian pension funds may be allowed to buy more public debt for five more years

Romania's Financial Supervisory Authority (ASF) wants to extend for another five years a provision by which the private pension fund managers (Pillar II and Pillar III) are allowed to keep more than 70% of their portfolios in debt instruments issued by Romania or another EU member state.

The 70% limit was waived for the first time in 2020 and extended on an annual basis.

The substantiation note attached by ASF to the bill that extends the provision for another five years suggests that the reason is the large amounts of money the fund managers will receive from contributors compared to the depth of the local equity market.

As the contributions to mandatory pension funds (Pillar II) increased to 4.75% of the gross wage as of January 2024 from 3.75%, ASF estimates that RON 16 billion (EUR 3.2 billion) will be paid in such contributions to Pillar II pension funds during the year 2024.

"Thus, implementing this waiver proves to be useful even if a single fund manager uses it," the ASF argued, quoted by Ziarul Financiar.

On January 31, 2024, Pillar II's investment in government securities amounted to almost RON 85 billion and represented 66% of their assets of RON129b. The investment in equity was RON 30.3 billion (23.5% of assets), and the investment in bonds was RON 5.84 billion (5.3% of total).

(Photo source: Inquam Photos/Octav Ganea)