Compenswiss fears US retaliation if State Street is stripped of custodian mandate

Compenswiss, the public institution managing Switzerland’s first pillar social security funds AHV, IV and EO, with total assets under management of CHF46.1bn (€48.9bn), fears retaliation from the US if the Swiss government proceeds with the decision to strip State Street of its custodian mandate in favour of a Swiss bank.

The Economic Affairs and Taxation Committee of the National Council (WAK-N), the lower house of the Swiss parliament, has approved a motion instructing the government (Federal Council) to nudge Compenswiss to axe the mandate with State Street.

This means that, if approved, Parliament will practically force Compenswiss to re-tender the custodian mandate to a Swiss bank. The National Council will decide next week whether the AHV funds must be held by a Swiss bank again, according to the Tages-Anzeiger newspaper.

The parliamentary committee said in a statement that State Street may be forced to follow “instructions from the US authorities to the detriment of Switzerland”, even if State Street does not manage the assets of the AHV compensation fund, the largest of the three funds under Compenswiss’s management.

Choosing a Swiss bank as custodian could minimise this risk, it added in the statement, explaining the reason why it is necessary to re-tender the mandate.

“There is a risk that the US could retaliate against Switzerland,” Eric Breval, director at Compenswiss, in the Tages-Anzeiger newspaper.

The US administration under president Donald Trump is increasingly confrontational, both with allies and enemies, imposing and threatening tariffs and sanctions to defend the country’s interests on the world stage.

The president of Compenswiss, Manuel Leuthold, warned about a confrontation with the US that “would endanger the existence” of banks that don’t survive without trading dollars.

Leuthold added: “We did not make the switch to US bank State Street lightly.”

The board of directors of Compenswiss decided in December 2023 to swap UBS with State Street as a custodian bank after 26 years. The change took place in July last year.

The Swiss Parliament started addressing Compenswiss’s custodian matters after Thomas Matter, a member of parliament (MP) for the Swiss People’s Party in the National Council, filed a motion asking whether it would make sense for security reasons to transfer the custodian mandate to a Swiss bank.

The MP warned that in case of sanctions, the US government could block the funds.

“We have to avoid even the smallest risk as much as possible, because pension money is ultimately about the substance of our retirement assets. The Federal Council has completely different options for enforcing Switzerland’s interests with a Swiss bank than if it had to call a US bank,” Matter told the Tages-Anzeiger.

Compenswiss rebuffed security concerns, saying the mandate with State Street does not cover the transfer of assets to a single country or the management of the first pillar’s assets.

Breval noted that there would always be a risk of sanctions, even if this is unlikely, and a Swiss bank would also enforce them.

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