An initiative to prohibit commercial banks in Switzerland from electronically creating money when they make a loan was overwhelmingly rejected by Swiss voters.
According to Reuters, more than three quarters of voters rejected the Sovereign Money initiative. In addition, all of the country’s 26 self-governing cantons voted against it.
The initiative called for commercial banks to stop creating money each time they issue a loan. Backers of the proposal argued that by shaking up the traditional financial system, it can ensure that the Swiss National Bank (SNB) is the only one that produces new money in Switzerland. In addition, only a portion of bank deposits would be backed by central bank notes, coins and bank deposits.
But many had concerns about the potential risks to the Swiss economy, including the Swiss government, which said it was pleased with the initiative’s rejection.
“Implementing such a scheme, which would have raised so many questions, would have been hardly possible without years of trouble,” said Finance Minister Ueli Maurer. “Swiss people in general don’t like taking risks, and … the people have seen no benefit from these proposals. You can also see that our banking system functions … the suspicions against the banks have been largely eliminated.”
Last month, Jean-Marc Decressonniere, the director of the Freie Gemeinschaftsbank, a small bank in Basel, became one of few in the industry to voice support of the initiative.
“In [the] future, it would be more sensible to have money administered by a central authority that is independent and looks at the whole economy,” he said. “Commercial banks have a more limited perspective based on their own profit targets.”
But in addition to the Swiss government, opposition also came from the SNB and business groups.
“We are pleased, as this would have been an extremely damaging initiative,” said Heinz Karrer, president of business lobby Economiesuisse.
The SNB also said the initiative would have made it much harder to control inflation in the country.
“With conditions now remaining unchanged, the SNB will be able to maintain its monetary policy focus on ensuring price stability, which makes an important contribution to our country’s prosperity,” it said in a statement.