Swiss Keep State Street for Pensions, Dismissing Trump Fears

State Street Corp. will remain custodian of a 46 billion-franc Swiss pension hoard after lawmakers narrowly rejected a bid to reassert domestic control as a guard against US strong-arming of the country. 

The lower house in Bern voted 98-89 on Thursday in favor of preserving the Boston-based bank’s mandate for the social security funds. The majority dismissed fears that the administration of US President Donald Trump could order State Street to withhold payments as a bargaining chip to pressure Switzerland. 

The outcome is a victory for the bank after recent setbacks in other European countries over its climate-change policy. It means 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 mean significant extra costs.

The law proposed by a parliamentary committee in January has showcased Switzerland’s nervousness about Trump. While the US president hasn’t singled it out 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. That could have risked reviving domestic worries about its dominance in the Swiss economy after it was forced to take over Credit Suisse two years ago.

Concern over Switzerland’s attractiveness as a location for banks featured in the parliamentary debate, with Interior Minister Elisabeth Baume-Schneider declaring that the bill would have “damaged the reputation of Switzerland as a financial center” and Kathrin Bertschy of the Green Liberals arguing that annulling State Street’s contract would hurt the perception of legal certainty.

Still, Thomas Matter, a lawmaker for the right-wing Swiss People’s Party, highlighted 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, which is 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 big symbolic victory against the dominance of Swiss institutions.

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 Switzerland when State Street got the mandate. Less than a third of the $52 billion are held in the US.

State Street is not the only US bank coming under scrutiny in Switzerland. This week, two socialist lawmakers questioned Zurich’s cantonal government about $36 billion held at JPMorgan Chase & Co. by the canton’s BVK pension fund. This issue remains open.

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