Figures show billions of Danish Kroner end year One Danish Krone is app 013

Figures show billions of danish kroner end year one

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pension funds. Figures show billions of Danish Kroner (end-year). One Danish Krone is app. 0.13 euro. Source: The Danish Supervisory Authority (Finanstilsynet). 6
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Figure 1 The share of equities in Danish life assurance companies and pension funds 1 1. The figure shows stocks and mutual fund assets as a percentage of total assets in Danish life insurance companies and industry-wide pension funds. Source: Danish Financial Supervisory Authority (Finanstilsynet). 4 Has the new regulation worked? Throughout 2008, the Danish pension industry has experienced severe losses due to the sharp fall in stock prices. It follows from tables 1 and 3 that by the end of 2007, the Danish pension institutions had again increased their holdings of stocks, thus again increasing their exposure to losses following from stock price falls. It may be asked to what extent the new regulation covering the Danish pension institutions have stood up to this test. ….(to be written)…. 7
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5 The optimal regime: Some reflections The efforts of policy makers to limit losses for investors during the financial crisis which hit Western Europe and in the United States in September and October 2008, demonstrate that it may be politically unacceptable to see investors in life insurance companies and pension funds experience large losses which imply cuts in pensions. This raises the question of the best way to prevent crises in pension institutions and how to handle such crises should they occur. In this regard, a useful distinction may be made between crises in single pension institutions and crises in the industry as a whole. 5.1 Crises in single pension institutions A crisis may occur in a single pension institution if the institution is managed badly. The pension institution may, for example, have taken too big risks in its investment policy. A pension institution may also have been managed by an incompetent management which during a prolonged period may have placed, for example, in shares which have offered a low return. The management may have been tempted to pursue personal interests, e.g. by investing in equity holdings which give the managements the opportunity to play a role in business decisions and thus to achieve a public profile in the media. The management may also have been tempted to offer too high guarantees for future pensions in order to attract customers. An obvious example of a crisis in a single pension institution is the collapse of the British life insurer, Equitable Life, in The obvious answer to a crisis in a single pension institution would be to cover the losses through a guarantee scheme through which other pension institutions provide support for the pensioners in the troubled company. We may, however, ask whether this is the appropriate approach to handle such a crisis. Thus, if only a single company runs into trouble, a large part of the blame necessarily falls on the management in the failed company. It follows that the crisis could have been averted if there had better management incentives or if there had been a stricter corporate discipline. This seems to be problems which should been dealt with at the level of the single institution. The right
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