This is not their T&Cs, this is their version of the standard risk disclosure brochure of the Swiss banking industry. My understanding is that this is a rewording of Article 101 of the Code of Obligations, which states that you are liable for the acts of the people to whom you delegate your contractual tasks. But this can all be waived contractually, and most banks do.
I have not thoroughly reviewed all the legal documents of the ZKB but this one seems most relevant, and it states:
Where safe custody assets may be held in sub-custody, the Bank is only liable for applying the customary due diligence with respect to the selection and the instruction of the sub-custodian. In the case of intermediated securities, it is also liable for applying the customary due diligence with respect to the monitoring of constant compliance with the selection criteria.
So in short, if the sub-custodian has a shortfall, the ZKB is not liable if it can prove that it has chosen a proper sub-custodian, and not a completely trash one. In practice, if there is ever a case of litigation, the ZKB will claim that the custodian was a regulated financial institution supervised by a local financial supervision authority and in good standing, and so they couldn’t know that it would have a shortfall.
To me, I read the BCV’s liability clause in their T&Cs (clause 1.3) as saying pretty much the same thing, but more vaguely:
Relative to the custody and administration of the Safe Custody Assets by BCV or a third party, BCV shall exercise, or shall cause to be exercised, the degree of care required by the circumstances. BCV shall not be liable if the Customer expressly selects a sub-custodian against BCV’s recommendation.