The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks. (Lord Acton)
As reported on Zero Hedge over the weekend, a Swiss pension fund manager calculated that he could save his clients a substantial amount of money by withdrawing cash from his fund’s bank account, which was yielding a negative interest return, and depositing the cash in an insured vault. Exercising his fiduciary responsibility, he notified his bank of an impending large withdrawal of CHF. The bank rebuffed the fund manager’s request, informing him:
We are sorry, that within the time period specified, no solution corresponding to your expectations could be found.
One banking expert argues that the bank’s action “is most definitely not legal” because the pension fund holds a “sight account,” which gives the holder the right to withdraw cash on demand. The Against the State: An ... Best Price: $9.94 Buy New $9.95 (as of 11:55 EDT - Details) president of the pension funds association (ASIP), Hanspeter Konrad sees in this incident the hand of the Swiss National Bank, which wants to discourage the hoarding of cash as a means of circumventing negative interest rates. Accordingly, “The National Bank has therefore recommended to the banks to approach withdrawal demands in a restrictive manner.”
As Hans Giger, professor emeritus at the University of Zurich, points out, however, while the SNB may “issue directives to the banks in the collective interest of the Swiss economy,” it is not allowed to influence the contract between a bank and a pension fund. The banks themselves are responsible for how they act on the directives.
That even a Swiss bank should, on its own hook, refuse cash payment to a holder of a demand deposit should not be surprising. As Murray Rothbard has shown, fractional-reserve banks since their inception have continually connived to restrict cash payments to their depositors either by lobbying government for legal suspension of payment or by adopting quasi- or extra-legal methods of discouraging withdrawals. Indeed, this was the case for both Scottish and U.S. banks during their respective eras of so-called “free banking.”
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