ZURICH, March 22 (Reuters) - An activist group launched a campaign in Switzerland on Thursday to do away with traditional bank lending based on minimum reserve requirements and limit the money supply to cash in circulation.
Monetary Modernization wants to make the Swiss National Bank (SNB) the sole arbiter of the money supply, and its proposal will in June be put to a referendum, triggered under Switzerland's system of direct democracy by a petition topping 110,000 signatures.
It says the current system whereby commercial banks create money each time they issue loans is unstable because it is secured by reserves representing just a fraction of the overall supply.
Under the proposal, banks would only be able to lend out pre-existing money.
Supporters say the plan would make the Swiss banking system more secure while avoiding asset bubbles and reducing the risk of bank crashes.
"If the amount of money available for lending is too little, the national bank can be asked for more. It will decide how much to offer and what the interest rates should be," said campaign member Emma Dornay,
The SNB, parliament and the government oppose the scheme.
SNB Chairman Thomas Jordan said in January that adopting the proposals would plunge the economy into "extreme uncertainty." (Reporting by John Revill; editing by John Stonestreet)