Banking Standards

Submission from the Christian Council for Monetary Justice (S010)

This review is an independent look at what prevents people from being allowed to choose for themselves in services that are publicly-funded. This may or not include what is available to people in terms of choice in the banking sector, a substantial part of which is now in some sort of public ownership. If a contribution on the banking sector is within your Terms of Reference then the Christian Council for Monetary Justice hope that the following may be of use to the reviewers:


1. there are two kinds of money in circulation:

o Cash, consisting of notes and coins, issued by the State

o Credit, aka "central bank money", issued by monetary and financial institutions

2. there are fundamental differences between these two kinds of money

o for Cash, the authority of the issuing agency is in the UK the Sovereign, i.e. The Crown or HM The Queen

o "credit money" requires "interest money" that nobody issues

3. the effects of interest are equally debilitating for the public and the private sector of the economy

o every interest payment requires borrowing from Peter to pay Paul

o mainly the people in monetary and financial institutions benefit from interest payments

o the growth of compounding interest on interest is exponential, i.e. unsustainable

4. increasing the money supply is decreasing the value of the currency due to printing "money"

o the value of "money" is deflated as the money supply is inflated willy nilly

o the function of money changes from "medium of exchange" and "store of value" to "tool for control", since debts are legally enforceable

5. credit becomes cash or "money", behind the bank counter, means:

o the quality conditions under which Cash is produced, the correctness of paper and printing for notes and the quality of metal for minting coins, are not applied

o no quality control means absence of quality, if not counterfeiting…

6. governments facilitate this process of Credit becoming "money", aka laundering, means:

o by borrowing money as national or public debt, the supply of credit money is increased, i.e. the value of the currency is debased to the detriment of the nation

o by demanding taxes to pay interest to the financial economy, the real economy is debilitated

o no matter which party wins an election, governments have been perpetuating the process of borrowing more and more through the budget deficit

7. there is a trend that has led to virtually replacing Cash with credit money from 50/50 after WWII to 3% Cash in the money supply


Currently there are proposed remedies for making choice of banking services more real for most people. Generally they propose incremental regulatory procedures to disable nasty bankers from behaving greedily and destructively.

The Christian Council for Monetary Justice, not well equipped for action, but active in debating possibilities, has advocated, for the UK, ending usury – and fractional reserve banking – by getting the Bank of England to take away from commercial banks the creation of most of the money in use.

This can be achieved in a single step when government instructs The Bank to issue, free of interest, all the money needed for the real economy as repayable debt. Any willing existing agency, such as high street banks, mortgage lenders, or credit unions, could administer the distribution of this interest-free credit for an administrative fee. This single step could be expected to crowd out undesirable features of the current system and to hugely benefit people engaged in healthy economic activity.

The real economy of goods and services, in this context, is seen to include finance for public infrastructure, industry and business (but not for financial services), for residential property purchase and for affordable short term credit for consumables.

24 August 2012

Prepared 22nd September 2012