van Dam, ReinAndersen, Erik Brink2012-05-292012-05-292008-02https://hdl.handle.net/10986/6594This paper examines the move towards risk-based supervision of pension institutions in Denmark. Although Denmark has not adopted a comprehensive model to assess risk it has developed a number of building blocks which it uses for risk-based assessment. The motivations for improving risk assessment include a desire to identify emerging problems, and concerns about the solvency of pension institutions. In Denmark there is extensive use of guaranteed minimum returns in both the accumulation and payout phases which create substantial obligations on pension institutions, and focus attention on the integrity and solvency of the institutions which provide them. In conjunction with freeing up investment restrictions and moving towards market valuation of assets, the supervisor has introduced a 'traffic light' stress test model which calculates the effect of several market scenarios - the red test which is the more plausible and the yellow test which is possible but less likely. In addition to the use of the traffic light system, there has been a growing emphasis on the adequacy of internal risk control systems and greater reliance on market discipline. Pension institutions have sought to reduce their exposure to market volatility by better matching of assets and liabilities. There is a much better understanding of the risks inherent in the pension institutions' portfolios, and there has been a substantial increase in the use of hedging instruments.CC BY 3.0 IGOACCOUNTANTACCOUNTINGACCOUNTING STANDARDSANNUAL CONTRIBUTIONSASSESSMENT OF RISKASSET ALLOCATIONASSET CLASSASSET CLASSESASSET LIABILITY MANAGEMENTASSET MANAGEMENTASSET MANAGERSAVERAGE BENEFITAVERAGE WAGEBALANCE SHEETBALANCE SHEETSBANKRUPTCYBENEFIT PLANBOND PRICESCALL OPTIONSCAPITAL ADEQUACYCAPITAL BASECAPITAL BASESCAPITAL OWNERSCAPITAL REQUIREMENTCAPITAL REQUIREMENTSCAPITALIZATIONCASH FLOWSCOLLECTIVE INVESTMENTCOMPANY PENSIONCONFLICTS OF INTERESTCONSTANT MATURITYCONTRIBUTIONCONTRIBUTION PLANSCONTRIBUTION RATECORPORATE BONDSCOUPONCOUPON RATECREDIT INSTITUTIONSCREDIT RATINGCREDIT RATINGSCREDIT RISKCURRENCYCURRENCY RISKCURRENCY RISKSDEBTDEBT INSTRUMENTSDEPOSITORDEPOSITORSDERIVATIVESDEVELOPING COUNTRIESDISABILITYDISABILITY BENEFITSDISABILITY INSURANCEDISCOUNT RATEDOMESTIC BONDSDOMESTIC EQUITIESEARNINGSECONOMIC ACTIVITYEMERGING MARKETSEMPLOYER PENSIONEQUITIESEQUITY MARKETSEQUITY VALUESEURO MARKETEXTERNAL ASSETFAIR VALUEFAIR VALUESFINANCIAL CRISISFINANCIAL INFORMATIONFINANCIAL INSTITUTIONFINANCIAL INSTITUTIONSFINANCIAL MANAGEMENTFINANCIAL MARKETFINANCIAL MARKETSFINANCIAL PERFORMANCEFINANCIAL POLICYFINANCIAL SECTORFINANCIAL STATEMENTFINANCIAL SYSTEMFINANCIAL SYSTEMSFIXED INCOMEFOREIGN CURRENCIESFOREIGN EQUITIESFUTURESGOVERNMENT BONDGOVERNMENT BOND YIELDSGOVERNMENT BONDSGOVERNMENT GUARANTEEGOVERNMENT PAPERGUARANTEE FUNDHOLDINGSINCOME FROM BONDSINCOME TAXINDEXED BONDSINDIVIDUAL ACCOUNTSINSURANCEINSURANCE COMPANYINSURANCE PRODUCTSINTEREST RATEINTEREST RATE CHANGESINTEREST RATE RISKINTEREST RATE SWAPSINTEREST RATESINTERNAL AUDITINTERNATIONAL BANKINVESTMENT POLICIESINVESTMENT REGULATIONSINVESTMENT RESTRICTIONSINVESTMENT RETURNSINVESTMENT RISKINVESTMENT RISKSINVESTMENT STRATEGIESINVESTMENTS IN EQUITIESJOINT-STOCK COMPANIESLABOR FORCELABOR MARKETLEGAL OBLIGATIONLEVEL OF RISKLIABILITYLIFE INSURANCELIFE INSURANCE COMPANIESLONG-TERM INTERESTLONG-TERM INTEREST RATELUMP SUMLUMP SUMSMARGINAL RATEMARGINAL TAX RATEMARKET CONDITIONSMARKET DEVELOPMENTMARKET DEVELOPMENTSMARKET DISCIPLINEMARKET ENVIRONMENTMARKET INTEREST RATESMARKET PARTICIPANTSMARKET RISKMARKET RISKSMARKET VALUEMARKET VALUESMINIMUM BENEFITSMINIMUM CAPITAL REQUIREMENTMORTGAGEMORTGAGE BONDSMORTGAGE LOANSMORTGAGESOCCUPATIONAL PENSIONOCCUPATIONAL PENSION SCHEMEOCCUPATIONAL PENSION SCHEMESOCCUPATIONAL PLANSOTHER ASSETSOWNERSHIP STRUCTURESPENSIONPENSION ASSETSPENSION BENEFITSPENSION COMPANIESPENSION CONTRACTSPENSION CONTRIBUTIONSPENSION FUNDPENSION FUND INVESTMENTSPENSION FUNDSPENSION PLANSPENSION SAVINGPENSION SCHEMEPENSION SCHEMESPENSION SYSTEMPENSION SYSTEMSPENSIONERSPERSONAL PENSIONPERSONAL PENSION PLANSPORTFOLIOPORTFOLIO MANAGEMENTPORTFOLIOSPRIVATE PENSIONRATES OF RETURNREAL ESTATEREAL PROPERTYREGULATORY FRAMEWORKREGULATORY STRUCTURERESERVESRETAIL FINANCIAL SERVICESRETURNRETURNSRISK ASSESSMENTRISK CONTROLRISK EXPOSURERISK EXPOSURESRISK MANAGEMENTRISK MANAGEMENT SYSTEMSRISK OF DEFAULTRISK PROFILERISK PROFILESRISK SHARINGRISKY ASSETSSAVERSSAVINGS BANKSSECURITIESSHARE OF EQUITIESSHAREHOLDERSHAREHOLDERSSMALL PENSIONSOLVENCYSPECIAL SAVINGSSUPERVISION OF PENSION FUNDSSUPERVISORY AUTHORITIESSUPERVISORY AUTHORITYSWAPSWAP CURVETAXTAX ADVANTAGESTAX INCENTIVESTAX RATETAX SYSTEMTAXABLE INCOMETAXATION OF INVESTMENT INCOMETOTAL COSTTRADE UNIONSTRANSPARENCYUNEMPLOYEDUSE OF DERIVATIVESVALUABLEVALUATIONVARIABLE RATEWAGEWAGESWITHDRAWALYIELD CURVEZERO COUPONWorld Bank10.1596/1813-9450-4540