Dec 2006 Financial News

How to revive the stock market...Central Bank Governor gives insight

Dec 02, 2006

WHEN the Central Bank assumed regulatory control of the insurance industry and private pension funds in June 2004, 42 out of 204 active pension plans exceeded the 50 per cent limit.

It is estimated (on the basis of incomplete information), that by the end of December 2005, about 11 pension plans still had equity holdings in excess of 50 per cent of total assets.

As of September 2006, two plans remain in excess, Central Bank Governor Ewart Williams said yesterday at the Business Insight Caribbean Investor Conference at the Hilton Trinidad in St Ann's.

Williams reviewed options which could be applied to revive the wilting stock market.

One that has garnered much support, he cited, uses the principles of the investment regime now applicable to insurance companies. He said: "A funding threshold of 150 per cent of pension liabilities is defined, to which the 50 per cent equity limit is applicable.

"Put differently, all plans with a surplus of less than 50 per cent of pension liabilities will remain subject to the equity limit of 50 per cent.

"Plans with a funding in excess of 150 per cent will be allowed to invest in equities beyond the 50 per cent limit.

"Put another way, trustees will be able to make additional equity investments with any surplus in excess of 50 per cent of pension liabilities, up to a maximum level to be determined," Williams explained.

The Governor said that an examination of 37 pension plans, which account for 85 per cent of total equity investments of pension funds, indicates that there are about ten plans which are way below the 50 per cent equity limit.


Source:
The Trinidad Express
Saturday, December 2nd 2006

http://www.trinidadexpress.com/index.pl/article?id=161060780