Swiss pension funds unmoved by political scrutiny of US banks

US banks and asset managers are under parliamentary scrutiny in Switzerland but they are not at risk of losing their business relationships with Swiss pension funds which instead face investment risk from a volatile US market.

The role of US custodian banks for Swiss pension funds is worrying mainly to politicians, who are concerned that sanctions imposed by the US government could prompt a US bank to freeze pension fund assets.

The National Council, the lower house of the Swiss Parliament, has voted against a motion by the Economic Affairs and Taxation Committee of the National Council (WAK-N) to re-tender the custodian mandate held by State Street, executed through the bank’s branch in Zürich, and pick a Swiss bank for Compenswiss, which manages CHF46.1bn (€48.9bn) for the country’s first-pillar social security funds.

Compenswiss analysed the risk of US authorities freezing assets during the tender process, concluding that the risks are very low.

Publica and BVK, which have JP Morgan Suisse as a custody bank, and Compenswiss, believe that turning their back on US banks to avoid risks of sanctions represents an even bigger risk than the potential actions of the US administration.