Switzerland preferred not to approve the controversial plan that would have seen commercial banks barred from electronically creating money when they lend beyond their deposits, Local.ch reports. So-called Sovereign Money Initiative was rejected by more than three-quarters of voters.
Sovereign Money Initiative called for Swiss 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.
All 26 self-governing cantons of Switzerland voted against Sovereign Money Initiative, preferring the keeping a traditional financial system. According to the polls, there are many potential risks to the economy, including the government, which said it was pleased with the initiative’s rejection.
Finance Minister Ueli Maurer explained that the implementing such a scheme, which would have raised so many questions, would have been hardly possible without years of trouble.
“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,”
Mr Maurer added.
Swiss financial experts about the Sovereign Money Initiative
However, a small bank in Basel has voiced its support of the initiative, arguing that the commercial banks have a more limited perspective based on their own profit targets. In the foreseeable future, it would be more sensible to have money administered by a central authority that is independent and looks at the whole economy.
An opposition in the Swiss government noted that Sovereign Money Initiative would have been ‘an extremely damaging initiative’, while the SNB also said the initiative would have made it much harder to control inflation in the country.