Banking transactions, non-cash (cashless banking)

The operation of lending business or deposit business, – if it remains excluded or is considerably impeded by agreement or business practice, – to dispose of the loan amount or the deposits by cash withdrawal – i.e. payment in cash. In Germany, institutions with such a business orientation are prohibited under Section 3 № 3 KWG. – The prohibition, which is criticized by some, is intended to prevent the emergence of closed payment circles within an economy. The dangers here lie primarily in the high capacity for money creation resulting from the exclusion or impediment of cash withdrawal. This is because, unlike ordinary institutions, these companies do not need to hold liquidity for their obligations. As a result, they can contribute to the increase in the money supply and thus to any disruption of financial stability to a much greater extent than the other institutions. Because they do not have any significant refinancing needs, those institutions which are geared to the non-cash principle are hardly dependent on the central bank. With the exception of the minimum reserve requirements, the central bank’s monetary policy cannot have an adequate impact on them. The minimum reserve requirements, however, offer no guarantee that these particular monetary policy dangers can be smoothed out, because the minimum reserve ratio is tailored to credit institutions engaged in normal business. Thus, because Unbarinstitutions have undue advantages in competition with other banks, and because they are considered islands from a monetary policy perspective, their prohibition is generally considered to be justified. – See Unbarinstitut, Werkssparkasse.

Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent!
University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/