Swiss OASI reserves in the clutches of US financial groups

We were recently startled by a report that made the rounds of the Swiss media: The safekeeping of our OASI (Old-age and Survivors’ Insurance) reserves – securities worth around CHF 40 billion! – are to be handed over to the US banking giant State Street. Of all things! As if we hadn’t learned our lesson from the US financial centre. The unfortunate affair was brought to light by three National Councillors who asked the Federal Council some uncomfortable questions. We were astonished to learn that the Federal Council was simply trying to shirk its responsibilities.

On 1 July, the OASI Social Security Fund announced that the responsible Compenswiss (see box) was withdrawing the mandate for OASI securities custody from UBS after 26 years and transferring it to the US financial giant State Street.

‘What is systemically relevant
should not be placed in foreign hands’

We will spare ourselves and our readers the details of the selection process by Compenswiss and focus on the central statement by National Councillor and banker Thomas Matter: “The management of funds in the first pillar is systemically relevant for our country” and his conclusion: “What is systemically relevant should not be placed in foreign hands.”¹
  State Street claims to be “a global leader” in the financial industry: “We manage nearly 10 per cent of the world’s assets” (!) and continues: “Experience the State Street advantage that helps you move the markets [...].” (statestreet.com).
  Do we want to “move the markets” with our OASI reserves and amass the fabulous profits of a US financial juggernaut – or should we rather prioritise the security of our pensions?

Federal Council
tries to shirk its responsibility

Three members of the National Council have so far expressed their justified concerns as representatives of the people.
  Daniela Schneeberger, National Councillor FDP (Question Time on 18 September 2024): “The OASI has entrusted its securities to a bank based in the USA. This is causing great concern among citizens. Extremely important national assets are being placed in US hands. Many people cannot understand this decision. Is the Federal Council aware of this concern? How does the Federal Council view this decision? Why was this step necessary?”²
  National Councillor Olivier Feller (FDP) expresses similar concerns in his interpellation of 25 September 2024.
  From the more than meagre response from Federal Councillor Elisabeth Baume-Schneider to Daniela Schneeberger: “Compenswiss is financially and organisationally independent, and the choice of custodian bank is one of its competencies. [...] The re-tendering of the mandate was recommended by the Swiss Federal Audit Office, as Compenswiss has been working with UBS for twenty years. [...] A custodian bank performs purely administrative tasks that pose no risk to the assets. It should therefore not be confused with an asset manager.”
  Three comments on this:

1. In the Federal Administration, under the heading with the non-Swiss name “Corporate Governance”, there are numerous public-law institutions of the Confederation that are no longer the responsibility of our representatives, but decide on the affairs of the Swiss people and the use of our tax or OASI money “on their own authority”. These include Swiss Post, the Swiss Federal Railways, Swissmedic, the authorisation and regulatory authority for therapeutic products, and the Swiss Federal Institute of Technology [ETH] – all of which have close ties to our country and are indispensable heavyweights. And Compenswiss, the administrator of our OASI/DI funds. Compenswiss is now shifting our OASI reserves to the USA, where other Swiss national assets have already seeped away, and the Social Democrat Federal Councillor responsible knows nothing better to say than: That’s none of my business.
2. Because we have been working together for twenty years, we have to advertise a new mandate? A strange justification. On the contrary, many years of good cooperation actually argue in favour of continuing it. Are the same circles behind this that pressurised Switzerland to incorporate CS into UBS? And now UBS is being stripped of mandates from the Swiss Confederation and shifted to banks across the Atlantic.
3. “No risk to the assets”: What did the then Federal Councillor Hans-Rudolf Merz say to those attacking Swiss banking secrecy? “You will bite your teeth out on this banking secrecy.” (“10 to 10”, SRF, 19 March 2008)
    

‘For the security of our
national wealth’ a Swiss bank

In his interpellation of 12 September 2024, National Councillor and finance expert Thomas Matter (SVP) asks the Federal Council some critical questions to which the Council has not yet answered. In summary, Matter wants to know why Switzerland withdrew the management mandate from UBS and, above all, whether it ‘would not make more sense for the security of our national wealth (1^st pillar) for the Swiss social security funds OASI, DI and EO’ to entrust the management of these funds to a Swiss bank.³
  The director of Compenswiss, which is responsible for the withdrawal of OASI securities management from Swiss hands. Eric Breval, on the other hand, asserts in the “Neue Zürcher Zeitung” that the change of custodian bank has “no consequences whatsoever for the location of the assets, nor does it have any influence on the management of the assets”.⁴
  This is not the place to discuss accounting subtleties. The experienced banking expert Thomas Matter thinks in political terms and includes Switzerland’s experiences with the superpower USA in his considerations. In an article in the SonntagsBlick, he says: ‘’‘They [the Americans, mw.] enforce their interests uncompromisingly. We have seen this with the dormant assets and the abolition of banking secrecy. And we are currently experiencing it with the sanctions against Russia’. Without batting an eyelid, the American authorities froze Russian assets. The same could happen to Switzerland. Because the international securities of the OASI will be held in an American bank in the future, the US government could also freeze these assets as part of sanctions, says Matter. ‘I don’t think it will come to that, but the risk has increased with the intensification of the geopolitical crises’.”⁵
  National Councillor Matter cites another danger for Switzerland: If State Street were to go bankrupt, the OASI would face “unforeseen problems”, and it could “take days or weeks before the OASI fund could again fully dispose of the shares and bonds”.
   It’s a good thing that we have parliamentarians who are standing up to the Federal Council and its corporate governance. Who knows whether the US financial centre would hand over a single cent of our assets if the State Street colossus went bankrupt. Let us think back to the externally imposed merger of the two major Swiss banks: the owners of certain bonds came away empty-handed – and this was not a bankruptcy at CS, but a Swiss bank with intact assets. A little more sense of reality and responsibility would suit the Confederation and its administration well. •

¹ Schmid, Beat. “Heikles Mandat für US-Bank stösst auf Kritik” (US Bank’s Delicate Mandate Draws Criticism), in: SonntagsBlick of 15 September 2024
² https://www.parlament.ch/de/ratsbetrieb/suche-curia-vista/geschaeft?AffairId=20247704/
³ Interpellation 24.3877, submitted by Thomas Matter on 12 September 2024 in the National Council. “Transfer of securities management from Switzerland (UBS) to abroad (State Street) for the compensation fund of OASI, DI and EO”.
⁴ Ferber, Michael. «Schweizer Volksvermögen in Händen der USA? Politiker kritisieren den OASI- Ausgleichsfonds für den Wechsel der Depotbank von UBS zu State Street» (Swiss national wealth in the hands of the USA? Politicians criticise the OASI compensation fund for changing its custodian bank from UBS to State Street), in: Neue Zürcher Zeitung of 7 October 2024
⁵ Schmid, Beat. “Heikles Mandat für US-Bank stösst auf Kritik” (US Bank’s Delicate Mandate Draws Criticism), in: SonntagsBlick of 15 September 2024