Regulation of Pension Fund Credit Risk: Lessons from the Banking Sector

• Autor(a) principal: Herbst, Pedro Americo
• Data de Publicação: 2007
• Outros Autores: Duarte Júnior, Antonio Marcos
• Tipo de documento: Artigo
• Idioma: eng; por
• Título da fonte: BBR. Brazilian Business Review (English edition. Online)
• Texto Completo: http://www.bbronline.com.br/index.php/bbr/article/view/417
• topic: pension funds; regulatory framework; credit risk; fundos de pensão; regulamentação; riscos de crédito

This article examines the regulatory framework for managing the credit risk of pension funds in Brazil. We believe that the current framework is not very effective at controlling credit risk, and also overly limits the investment possibilities of pension fund managers. We consider the regulatory framework for banks as an alternative approach for future developments, and propose that the rules on credit risk exposure of pension funds and banks be made uniform. The resulting regulatory framework would be more effective and easy to monitor, facilitating the work of external supervision and auditing. Finally, we present a numerical example using real data on six Brazilian pension funds to illustrate the proposal.