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Brussels, 28 January 2010

Free movement of capital: Commission requests Slovakia to remove investment restrictions on statutory pension funds

The European Commission has decided to formally request Slovakia to remove certain investment restrictions on statutory pension funds, which in the Commission's view constitute an infringement of Article 63 TFEU prohibiting restrictions on the free movement of capital. This formal request takes the form of a supplementary "reasoned opinion", the second stage of the infringement procedure laid down in Article 258 TFEU. If there is no satisfactory reply within two months, the Commission may refer the matter to the Court of Justice of the European Union.

In reply to its letter of reasoned opinion addressed to the Slovak authorities on 26 June 2008, the Commission was informed that Act n° 43/2004 on retirement pension savings will be amended with the aim of removing all obstacles to the free movement of capital.

However, in the Commission's view, Article 82, para. 5 of the Act n° 43/2004 (as amended) still raises a problem of compatibility with EU law since it entrusts the National Bank of Slovakia with the power to authorise a pension fund to invest its assets, up to 50 % of their net value, only in transferable securities and money market instruments issued or guaranteed by a Member State belonging to the Euro area. Thus it allows the Slovak authorities to maintain a discrimination against investments in securities and money market instruments issued or guaranteed by non-Euro area Member States or third countries, thus continuing to raise concerns as to its compatibility with the free movement of capital principle enshrined in Article 63 TFEU.

The explanation provided by the Slovak authorities, that this provision aims at limiting credit and currency exchange risks, is not pertinent in the Commission's opinion.

Article 82, para. 5 of the Act permits a derogation to be given from the general prudential rule set out in Article 82, para. 4, to which all pension fund investments are otherwise subjected. In particular, investments in non-Euro area financial instruments remain subject to the absolute 20% ceiling set out in para. 4., and a pension fund can never be authorised to invest from 20% to 50% of its assets in financial instruments of one single non-Euro area Member State. The Commission does not see any overriding principle of public interest that can justify such discrimination. Although the limitation of credit and currency risks of pension funds could arguably constitute a pertinent overriding principle of public interest, Article 82, para. 5 of the Act as amended is neither suitable nor proportionate to meet this objective.

Limiting investments to instruments issued or guaranteed by Member States in the Euro area is not suitable to limit credit risks, and the fact that a State issuing or guaranteeing a financial instrument is not from the Euro area does not rule out the solvability of a debtor. Since it may deter investment in instruments issued or guaranteed by creditworthy authorities, it is also not proportionate with a view to limiting credit risks. Furthermore, a location criterion is not suitable, and therefore also not proportionate, to protect against currency exchange risks, since the location of the issuer or guarantor of a financial instrument is not relevant in this respect, as it does not guarantee that a financial instrument is denominated in the currency in which the investor's liabilities are expressed.

The latest information on infringement proceedings concerning all Member States can be found at:

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