Voters in Switzerland today overwhelmingly voted to reject a plan that would have required banks to only lend money that they had deposits to back.
More than 75 per cent of votes cast opposed the motion and none of the country’s 23 cantons backed it.
The initiative would have meant that commercial banks would not be able to create new money, and would only be able to lend money if they held the deposits to back it up.
The “vollgeld” or “real money” proposal would have meant the Swiss National Bank was the only body in the country that could create new money.
Heinz Karrer, president of business lobby Economiesuisse said he was glad the proposal had been defeated as they would have been “extremely damaging”.
Critics of so-called “fractional reserve banking,” where banks only hold a percentage of what they lend in deposits have included heavyweights such as former Bank of England governor Mervyn King.
UK group Positive Money called for a “global conversation” about the control of money creation.
Its executive director Fran Boait, said: “The fact that around a quarter of voters supported the vollgeld initiative shows there is a real appetite for radical reform of a money and banking system which does not seem to be working for most people.
“This vote should not represent the end, but rather the beginning of a global conversation about whether control of money creation should be in private or public hands.”