Switzerland would have an untested financial system that would differ fundamentally from that of any other country. This would create turmoil on the financial markets even before its implementation. The changeover would in any case be very difficult and the long-term consequences uncertain. Many questions therefore remain unanswered. This is not surprising since the introduction of a sovereign money system represents a profound change in the monetary order and a radical move away from the manner in which the SNB has conducted its monetary policy to date. Comments on digital central bank money for the general public  The second suggestion, which I would like to discuss briefly, is the introduction of digital central bank money for the general public. Digital central bank money is defined as electronic money issued by the central bank, denominated in the national currency. In Switzerland, academics have mooted the idea as an alternative to the sovereign money initiative. 9  9  Cf. D. Niepelt (2016), Elektronisches Notenbankgeld ja, Vollgeld nein, Neue Zürcher Zeitung, 237 (138), 16 June, p. 10; A. Berentsen, ‘Die Alternative’, vollgeld-initiative.com (consulted on 31 October 2017). Page 9/12  Proponents see the idea as a way of broadening the public’s access to central bank money, while at the same time avoiding the disadvantages of the sovereign money initiative. A simple way to envision digital central bank money for the general public is in the form of sight deposits with the SNB.
Likewise, customer deposits at a bank grow when customers make a shift in their portfolio from medium term debt certificates issued by the bank to deposits, or if they take cash to the bank and have it credited to their account. When transactions are conducted in the opposite direction, or when borrowers pay off their loan, the banks’ customer deposits decrease accordingly. Page 5/12  Let us take a step back and look briefly at what actually goes on at an individual bank. 7 A bank’s balance sheet typically contains comparatively illiquid, long-term claims such as loans on the assets side and comparatively liquid, short-term liabilities such as sight deposits on the liabilities side. The bank therefore engages in liquidity and maturity transformation, mediating between the diverging requirements of savers and investors. Savers want secure and readily available deposits, while investors need long-term loans to finance projects, which tend to be illiquid. The bank thus bears both credit risk and liquidity risk. Due to the large number of depositors and borrowers, these risks can be diversified. Moreover, with their focus on lending activities, banks have the advantage over individual savers of being better able to assess and monitor borrowers. This opens up access to loans for parts of the economy that cannot raise funds on the capital market and would hardly be able to finance their projects without a bank. By providing loans, banks therefore perform an important economic task.