Swiss Referendums To Be Held to Reign Banks In

As we arrive into the new year, we are all excited to see what lies ahead for us. Often when the new year comes around, people make a resolution. Some make the vow that they will eat healthier, others will focus on going to the gym more, and others will concentrate on their finances. The Swiss government seems to have similar thinking in regards to taking charge of their finances.

Announced at the end of last year, the government announced that it would be holding a referendum in regards to Swiss commercial banks having the ability to create their own money. The banks create the money under fractional reserve banking — the process of extending credit to their clients. Lead by the Swiss Sovereign Money Initiatives (SSMI), there are two main goals in the proposal. The first would be to limit banks by ensuring they only lend the cash that they already have in existing reserves. This means that if a bank only has $50 million in reserves, they can only lend up to that amount instead of creating new money. The second would address who would be allowed to create all new currency. The referendums propose that all new money would be exclusive created by the Swiss National Bank.

At the moment, private banks are the leaders in creating new currency for the country. Fractional-reserve systems work as banks are only required to keep a small amount of their clients deposits in their reserves. To create new currency, banks will draw on client’s loans they already have to support new bank loans. Banks can create or loan a substantial amount of currency from their vaults from nothing. The SSMI has stated that around 90% of Swiss currency has been created by these banks due to fractional reserve banking. They want to force commercial banks back to a 1 to 1 to try to prevent a bursting cycle in the Swiss Economy.

The referendum has been received in many different ways. Some people are excited to see a country trying to take banking and money issues seriously, and others didn’t respond to it in a positive manner. One major problem people have with the referendum is that the Swiss National Bank is a private bank as well. It will be interesting to see how this referendum plays out and how the world responds to it.

Once a date is set, citizens will be able to go out and cast their vote on this issue. The last referendum was held in 2014 when the Swiss people voted on the matter of the Swiss National Bank selling the country’s gold on the open market. Due to SNB selling it, the national gold reserves dropped to 7% from 20%. The referendum would have created a law that would force the gold reserves to be raised back to 20%. Until SNB started to sell the gold in 2000, the swiss franc had been backed by the gold reserve. When it was time to vote, 78% of the Swiss people voted no.