By Fiona Stewart, John Ashcroft & Nina Paklina
The governance, oversight and performance measurement of financial supervisory authorities are increasingly recognized as important topics – not least due to the recent financial crisis and perceived problems in (and lack of) the regulatory oversight of financial institutions. Yet this is a relatively under-researched area, particularly in relation to pension supervision. This paper therefore attempts to combine theoretical material from a range of financial sectors along with practical examples from the pensions sector to establish what the good governance of pension supervisory authorities entails, how it is applied in practice, and how it can be monitored and measured.
Good governance of pension supervisory authorities can be summarized in four categories: Independence: requiring clarification of the authority‘s responsibilities and powers, processes for appointing its governing board and the ability to secure resources and operate without undue influence; Accountability: involving external audits, suitable internal organisation and measuring performance; Transparency: ensuring that the authority‘s objectives and achievements are understood, and that a consultative relationship with industry is established; Integrity: requiring codes of conduct, discretion to apply powers, internal controls and competent staff.
In terms of performance, though it is difficult to measure the effectiveness of pension supervisory authorities as ‘counter-factuals’ (i.e. what did not happen) and external factors play a large part, supervisory authorities could establish a range of measures looking at the following categories: Effectiveness measures: looking at outcomes against the authority‘s high level objectives; Efficiency measures: using the supervisor‘s credibility or reputation with its key stakeholders as a proxy or performance pledges; Economy measures: which could take the form of cost per inspection or cost of overheads relative to operational activities.

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