State Street will remain the custodian of a 46 billion-franc Swiss pension fund after lawmakers narrowly rejected a bid to reassert domestic control. The Swiss lower house voted 98-89 on Thursday to preserve the Boston-based bank’s mandate for the social security funds. The decision dismisses fears that the administration of US President Donald Trump could order State Street to withhold payments as a bargaining chip to pressure Switzerland.
This outcome is a victory for the bank after recent setbacks in other European countries over its climate-change policy. As a result, state agency Compenswiss, which oversees the fund, won’t need to rerun a tender process completed in late 2023 that ended UBS Group AG’s quarter-century mandate. Lawmakers voted according to the advice of the Swiss government, which had warned that revoking State Street’s contract within the first five years would incur significant extra costs.
The law proposed by a parliamentary committee in January has showcased Switzerland’s nervousness about Trump’s actions. While the US president hasn’t targeted Switzerland with tariffs that could soon hit the neighboring European Union, memories linger of how the country was branded a currency manipulator during his first term of office. If the bill had ultimately passed, UBS would have been in a prime position to regain the mandate.
This could have revived domestic worries about its dominance in the Swiss economy after it was forced to take over Credit Suisse two years ago.
Swiss lawmakers back State Street mandate
Interior Minister Elisabeth Baume-Schneider declared that the bill would have “damaged the reputation of Switzerland as a financial center.” At the same time, Kathrin Bertschy of the Green Liberals argued that annulling State Street’s contract would hurt the perception of legal certainty.
Nonetheless, Thomas Matter, a right-wing Swiss People’s Party lawmaker, emphasized that the pension assets were “systemically relevant.” “We have to avoid even the smallest risk because these assets are ultimately the substance of our retirement funds,” he said. For State Street, one of the world’s biggest custodian banks supporting $46.6 trillion in assets, the mandate generates revenues in the high-single digit millions annually, according to a person familiar with the matter. Winning the contract was a significant symbolic victory against the dominance of Swiss institutions.
As the custodian of the assets, State Street has appointed local depository banks to handle the funds, ensuring that no Swiss savings have actually left Switzerland. Less than a third of the $52 billion are held in the US. State Street is not the only US bank under scrutiny in Switzerland.
This week, two socialist lawmakers questioned Zurich’s cantonal government about the $36 billion held at JPMorgan Chase & Co. by the BVK pension fund. This issue remains open.
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