Last week, Douglas introduced a Bill designed to reform the banking system and to prevent banks automatically treating individuals money as if it were their own.
Douglas’ Financial Services (Regulation of Deposits and Lending) Bill aims to give consumers greater protection – and also seeks to prevent the build up of credit bubbles, followed by busts.
Douglas says, “At present, when you deposit money in a bank, that bank - not you - legally owns the money. The banks can - and do - use that money as they please. They can issue credit against it many times over.
“This is a form of legal privilege that banks have, which no other business is allowed. It’s wrong that banks should automatically be able to issue credit against your deposits again and again and again.
At the height of the credit bubble, for every £1 deposited at the bank, banks had issued over £40 worth of IOUs. UK banking resembled a giant credit pyramid. No wonder the money ran out.”
The current legal status of bank deposits allows banks to create as much credit as they want during the boom times. But as we have seen, they then have to turn to the taxpayer when reality comes home. My Bill seeks to prevent this happening again”.
The second reading of the bill will be on Friday 19th November.