Swiss banking reformers have obtained the 100,000 signatures needed to initiate a referendum to restrict bank lending or, as they put it, to stop banks benefiting from being able to create electronic money out of nothing.
Explaining the apparent logic behind the proposal in the Financial Times (5/6 December), Martin Sandhu wrote:
‘The bank decides whether it wants to make you a loan. If it does, then it simply adds the loan to its balance sheet as an asset and increases the balance in your deposit account by the same amount (that’s a liability for them). Voilà; new electronic money has been created.’