Swiss voters say big no to sovereign system that could 'create money'

Switzerland dismissed a proposal to radically change the way banks lend money, a victory for the financial establishment including central bank chief Thomas Jordan. Vollgeld, as the plan is known in German, was the latest in a string of national ballots in recent years that critics argued were reckless and would make Switzerland unattractive for businesses. Swiss National Bank President Jordan became one of its most prominent critics, saying it amounted to a “dangerous experiment.”

 The sovereign money initiative would have ended the centuries-old system of fractional reserve banking by allowing only the SNB to create money and requiring checking accounts to be fully backed by assets that are a direct claim on the monetary authority. Three quarters of voters rejected it. “The Swiss are known to be cautious people, especially in the realm of finance,” said Michael Hermann, a political scientist who heads Zurich-based research institute Sotomo. Since Vollgeld meant entirely uncharted territory, voters rejected it, given that “uncertainty is always poison for stability.”