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I don't really understand how this isn't a proposal to effectively end lending. If banks are required to hold 100% reserves against their deposits, where exact

I don't really understand how this isn't a proposal to effectively end lending. If banks are required to hold 100% reserves against their deposits, where exactly are they supposed to get money for lending? The article says "they’ll only be able to lend money that they have from savers or other banks" but that seems inconsistent with the 100% reserve requirement. If I'm required to hold on to 100% of deposits, I can't lend them out.

sanxiyn 11y ago
You can't lend demand deposit, but you can lend time deposit.
- princeb 11y ago
  won't be surprised if affected banks started selling deposit swaps if this comes to pass. would be pretty interesting if cash funds picked this up so that the everyday man can have a little bit of exposure to what is the bread and butter of the bank as we know it. actually this probably won't affect much. it just means the capital requirements is increased. a bank may not necessarily choose to utilize its deposits before any other source. a bank can happily lend deposits and borrow on the overnight all at the same time to finance day to day operations.
scotty79 11y ago
> If banks are required to hold 100% reserves against their deposits, where exactly are they supposed to get money for lending? They can borrow money from central bank if they think they can lend it for more. I don't think safety improves through that, because if retail borrowers don't pay up en masse we still have a lot of money in the economy that we don't know how to take back. ... maybe additional safety through one more layer of oversight ... if commercial banks give bad loans, central banks could prevent them from taking more loans On the plus side less profit from taking the risk of overinflating money supply lands in commercial bank owners hands.
deleted 11y ago
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atmosx 11y ago
It's not, it can not be. Banks will just have to answer to the central bank for big loans and truth is that it makes sense if you think that every single bank will have to rely on the central bank when it faces a bank-run... So now the central bank will be able to control the banks in a more direct way (theoretically it already does, but in practice it didn't work in many countries, don't know about Switzerland though). So, nothing spectacular except from the idea of putting this into a referendum instead of saying "No/Yes" without consulting the population. Switzerland is amazing.
ucho 11y ago
It is more likely to kill almost all deposits. The bank wouldn't really profit from stored money so they will want fee for keeping money. Interesting experiment but I definitely wouldn't want it to happen in my country.
- lxgr 11y ago
  Only if central bank deposits do not bear interests. If they do, depositing money at a commercial bank would increase that bank's central bank balance. If the central bank's deposit interest rate is higher than the commercial bank's, this would generate a profit for the commercial bank. In the Eurosystem, for example, minimum reserves bear interest even today; only excess reserves are "punished" by negative interest rates.
- tonfa 11y ago
  There's already no or negative interest rates for deposits in CHF.

sanxiyn 11y ago

You can't lend demand deposit, but you can lend time deposit.

princeb 11y ago
won't be surprised if affected banks started selling deposit swaps if this comes to pass. would be pretty interesting if cash funds picked this up so that the everyday man can have a little bit of exposure to what is the bread and butter of the bank as we know it. actually this probably won't affect much. it just means the capital requirements is increased. a bank may not necessarily choose to utilize its deposits before any other source. a bank can happily lend deposits and borrow on the overnight all at the same time to finance day to day operations.

scotty79 11y ago

> If banks are required to hold 100% reserves against their deposits, where exactly are they supposed to get money for lending? They can borrow money from central bank if they think they can lend it for more. I don't think safety improves through that, because if retail borrowers don't pay up en masse we still have a lot of money in the economy that we don't know how to take back. ... maybe additional safety through one more layer of oversight ... if commercial banks give bad loans, central banks could prevent them from taking more loans On the plus side less profit from taking the risk of overinflating money supply lands in commercial bank owners hands.

deleted 11y ago

[deleted]

atmosx 11y ago

It's not, it can not be. Banks will just have to answer to the central bank for big loans and truth is that it makes sense if you think that every single bank will have to rely on the central bank when it faces a bank-run... So now the central bank will be able to control the banks in a more direct way (theoretically it already does, but in practice it didn't work in many countries, don't know about Switzerland though). So, nothing spectacular except from the idea of putting this into a referendum instead of saying "No/Yes" without consulting the population. Switzerland is amazing.

ucho 11y ago

It is more likely to kill almost all deposits. The bank wouldn't really profit from stored money so they will want fee for keeping money. Interesting experiment but I definitely wouldn't want it to happen in my country.

lxgr 11y ago
Only if central bank deposits do not bear interests. If they do, depositing money at a commercial bank would increase that bank's central bank balance. If the central bank's deposit interest rate is higher than the commercial bank's, this would generate a profit for the commercial bank. In the Eurosystem, for example, minimum reserves bear interest even today; only excess reserves are "punished" by negative interest rates.
tonfa 11y ago
There's already no or negative interest rates for deposits in CHF.