ZURICH (Reuters) - A Swiss group pushing a sovereign money initiative on grounds it will make the country’s banking system more secure has collected 100,000 signatures necessary to eventually put the matter to a popular vote, it said on Saturday.
The group, Monetary Modernization, wants to make the Swiss National Bank alone responsible for creating the country’s money, not just coins and banknotes, but also so-called “electronic money” that makes up most bank accounts.
The group says the current fractional reserve system - where banks “create” money each time they issue loans - is unstable because it is secured by reserves representing just a fraction of the currency actually created by the national bank.
Raffael Wuethrich, a spokesman, said his group would formally hand over the 100,000 notarized signatures to federal administration officials in Berne on Dec. 1. He added it could take as long as five years before the measure goes to voters.
“Banks would no longer be able to create their own money when they extend credit,” Wuethrich said, adding such a system would minimize the potential for a banking system collapse as all money would be backed by the Swiss National Bank.
Discussions over sovereign money are also underway in Iceland. A leader in Iceland’s parliament produced a report suggesting such changes as a remedy for an unstable system in which the island nation’s banks collapsed starting in 2007.
Critics counter such radical reforms have negative consequences, including putting public money at risk by making the central bank the most important creditor of commercial banks and by increasing potential for political favouritism.
“The central bank would have to evaluate the lending practices of banks and the allocation of credit to different sectors of the economy,” wrote researchers from Bank J. Safra Sarasin this week. “Political meddling in the credit allocation process is very likely and often results in directed loans to politically well-connected clients.”
Switzerland has a robust system of direct democracy where citizens regularly vote on popular initiatives.
Reporting by John Miller