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Switzerland: Swiss Voters Reject Popular Initiative on Sovereign Money

(June 12, 2018) On June 10, 2018, Swiss voters rejected by a vote of 75.7% to 24.3% the “Sovereign Money Initiative.” Voter turnout was 33.8%. (Vorlage Nr. 618. Vorläufige amtliche Endergebnisse. Volksinitiative vom 01.12.2015 “Für krisensicheres Geld: Geldschöpfung allein durch die Nationalbank! (Vollgeld-Initiative)” [Proposal No. 618, Preliminary Official Results: Popular Initiative of Dec. 1, 2015 “For Crisis-Proof Money: The Swiss National Bank as the Sole Institution to Create Money! (Sovereign Money Initiative)”], SWISS FEDERAL CHANCELLERY (June 10, 2018).) The initiative would have prohibited commercial banks from creating electronic money through lines of credit without using reserves to back the loan and would have made the Swiss National Bank (SNB) the only institution allowed to bring money into circulation. Commercial banks would have been required to hold 100% reserves against their deposits. (Eidgenössische Volksinitiative, “Für krisensicheres Geld: Geldschöpfung allein durch die Nationalbank! (Vollgeld-Initiative)” [Swiss Federal Popular Initiative “For Crisis-Proof Money: The Swiss National Bank as the Sole Institution to Create Money! (Sovereign Money Initiative)” (Dec. 22, 2015), BUNDESBLATT [BBl.] [FEDERAL GAZETTE] I 9651 (2015).)


According to article 99, paragraph 1, of the Swiss Constitution, the Confederation is responsible for money and currency and has the exclusive right to issue coins and banknotes. That right is exercised by the SNB in accordance with the National Bank Act. The initiative would have amended article 99 of the Swiss Constitution to include the competence to create “electronic money” among the exclusive rights of the Swiss Confederation. Thus, this right would also have been transferred to the SNB. (BUNDESVERFASSUNG [BV] [SWISS CONSTITUTION], Apr. 18, 1999, SYSTEMATISCHE RECHTSSAMMLUNG [SR] [SYSTEMATIC COMPILATION OF LAWS] 101, Federal Council website; Nationalbankgesetz [National Bank Act], Oct. 3, 2003, SR 951.11, art. 4, Federal Council website).

Position of the Swiss Federal Council

The Swiss Federal Council—the Swiss government—recommended rejecting the initiative. It argued that although the intention of the initiative—preventing financial crises—was good, the proposed means to achieve it were wrong. The explanatory memorandum stated that bank runs are only one cause of financial crises and there are more effective ways to guarantee financial stability, which are also less drastic. The Federal Council and the Parliament implemented such measures after the financial crisis that began in 2008, among them higher capital requirements, higher liquidity coverage ratios, and higher deposit insurance. (Volksabstimmung vom 10. Juni 2018. Erläuterungen des Bundesrates [Popular Initiative of June 10, 2018. Explanatory Memorandum from the Federal Council] (Explanatory Memorandum), at 14, Swiss Government website).) Furthermore, the Federal Council noted that bank lending is the core business of banks and the higher costs associated with finding new financing options would most likely be passed on to bank customers. (Id.)

The Federal Council also warned that approving the initiative would have endangered the independence of the SNB and the fulfillment of its mandate. If the SNB had to create money “debt-free” and distribute it to the Federation, the cantons, and the population, it would then be directly financing public expenditures. The SNB would have become subject to political pressure as governments generally seek to increase public spending. (Id. at 15.)

For more background on the popular initiative and sovereign money systems in general, see Jenny Gesley, Switzerland: Referendum on Sovereign Money Will Go to a Vote, GLOBAL LEGAL MONITOR (Jan. 20, 2016).