Feeling the heat, government plans action on pension fund
The government is due to announce measures today regarding the management of the reserves of social insurance funds, in an effort to dampen the uproar arising from the allegations of a sale of overpriced government bonds from a civil servants’ fund. The Capital Market Commission (CMC) said earlier this month that the Akropolis brokerage had acted against the interests of its client in the sale of bonds to the civil servants’ auxiliary pension fund (TEADY). It is estimated that the fund paid -5 million more than it needed – a sum allegedly squandered in bloated commissions charges. The issue has embarassed the government – especially Labor Minister Savvas Tsitouridis – which appoints the administrators of state pension funds. Tsitouridis asked for the resignation of the TEADY fund’s board, but the opposition has not missed the opportunity to attack him personally. The CMC, which has temporarily revoked Akropolis’s trading license, has said the brokerage «acted to the detriment of its client, resulting in the client suffering a substantial loss.» Akropolis Securities has denied any wrongdoing. Sources said the measures, to be announced after a broad meeting of all senior ministers, stock market officials and the governor of the Bank of Greece, Nicholas Garganas, will include a ban on placements in structured bonds until the end of the year, stricter regulations and auditing of pension funds’ books going back to 1997. The new rules will include strict adherence to the 23 percent limit for investments in stocks, safeguards for investments in mutual funds and enhanced supervisory powers for the Bank of Greece for investments in bonds. The same sources said Deputy Finance Minister Petros Doukas will propose the introduction of a system of internal control in pension funds and the enlargement of the participation of institutional investors in their management. But beyond the urgent short-term moves, ministers are said to also favor the adoption of long-term institutional measures. Separately, a prosecutor yesterday received a Labor Ministry report of an investigation into the affair and will pursue the probe. The Finance Ministry’s General Accounting Office said in a statement that the bond, issued on February 22 for a total sum of -280 million to pay for arms purchases, was placed on favorable terms and that the ministry bears no responsibility for the actions of market intermediaries. The reserves of pension funds are estimated at about -29 billion but no one seems to know how much of this has been invested in the stock market. It is considered certain, however, that they far exceeded the 18 percent cap in force during the 1999-2000 bull market.
