How relevant is risk-based supervision for pension funds: the regulators perspective.

Abstract

Over the past two decades, privately managed pension systems have expanded greatly to play a central role in the provision of retirement income worldwide. The design and operation of these systems vary extensively, but the basic reason for their adoption remains unique across the board: countries need to provide affordable and sustainable income for their retired citizens. Achieving this objective becomes a challenging task in the face of the uncertainties created by globalization and rapid integration of financial markets. The utilization of risk-based methods originates primarily in the supervision of banks. In recent years, it has increasingly been extended to other types of financial intermediaries including pension funds and insurers. This trend is closely associated with the rising awareness of the convergence of regulatory focus and concerns within the financial sector. Given the move by other financial sectors to initiate a 'risk-based' approach to supervision, pension supervisory authorities are also looking to adopt such . methods. This paper, therefore, provides an insight into the relevance of risk-based supervision for pension funds in Nigeria.