State Street is at risk of losing a $52 billion pile of Swiss pension assets as citizens start to worry that their savings might become a bargaining chip in Donald Trump’s deepening trade war with Europe.
Lawmakers in Bern are scheduled to vote on March 13 on a bill that seeks to order the state agency Compenswiss to move custody of the assets back to a hometown bank. It would be the latest sign that the U.S. banking behemoth is at risk of losing key business in Europe after State Street had mandates pulled by pension funds in the U.K. and Scandinavia.
“The custody of assets entrusted by Compenswiss in Switzerland is the core business of State Street,” a spokesperson for the Boston-based firm said ahead of the vote. “The bank carries out this mandate with due diligence, drawing on its over 230 years of experience in this field. State Street does not comment on the political decision-making process.”
The vote showcases nervousness in Switzerland — a nation famed for its obsession with the preservation of wealth — at the advent of the new Trump administration. While the U.S. president hasn’t yet threatened the country with tariffs — as he’s done to the neighboring European Union — memories linger of how Switzerland was branded a currency manipulator during his first term in office.
“The risk of the U.S. authorities freezing the assets of the AHV compensation fund was analyzed by Compenswiss as part of the tender process and deemed highly unlikely,” Eric Breval, chief executive officer of Compenswiss, said in a statement to Bloomberg. “Even with a Swiss bank as the global custodian, the AHV fund would not be protected from sanctions.”
State Street is not the only U.S. bank coming under scrutiny in Switzerland. This week, two socialist lawmakers also questioned Zurich’s cantonal government about $36 billion held at J.P. Morgan Chase & Co. by the canton’s BVK pension fund. A spokesperson for J.P. Morgan declined to comment.
To be sure, as a custodian of the assets State Street has appointed local depository banks to handle the funds, meaning no Swiss savings have actually left the country. But anxiety around U.S.-European ties is now such that any American involvement in money management is starting to make locals uneasy.
Thomas Matter, a lawmaker for the right-wing Swiss People’s Party who pushed for the bill, acknowledged to Zurich’s Tages-Anzeiger that the risk of the U.S. sanctioning Switzerland is low.
“But we have to avoid even the smallest risk, because these assets are ultimately the substance of our retirement funds,” he said.
State Street only began providing custodial services for Switzerland’s public pension system, known locally as AHV, last year after it won the mandate away from UBS Group, which had previously held the mandate for more than two decades.
The move was done in order to save Switzerland as much as 5 million francs in the coming years and the government has warned it could face added costs if the mandate is revoked from State Street within the first five years.
