New Banking System
Posted: Mon Mar 16, 2015 6:20 am
What I am proposing is one of the methods of :
I.
The First method involves simply borrowing as much money as you want and interest and only when people buy them do you get the money, essentially letting the market decide the credibility of the business in question.
II.
This method involves getting the money instantly by going up to business that offers "underwriting" services the ability to negotiate with you to issue bonds over the interest rate,and the total principal of the issue. Then they negotiate involving the amount of fees they will receive, afterwards they have the option to sell the bonds to the market with a lower interest rate as a way of making profit.
Example of deal progression:
I.
Company A asks for $1 billion,5% -> Issues on market -> Company B Buys $5 mil worth of bonds - ----- Now Company A bonds worth $95 mil are left and Company A receives the $5 million
II.
Company A asks for $1 billion,1% underwriting from Company I -> I refuses and offers them $1 billion 5% -> Company A agrees and receives the 1 billion and begins paying interest -> Company I now issues the bonds at a rate of 2% on the market and every year takes the gap of 3% for the bonds
There is also a portion that involves consumers and the creation of a consumer banking system by companies. How it works is that consumers can deposit or borrow money from a bank which can only move a certain amount of Savings and Loans a day. Now you can as a global setting adjust how much money you are allowing to have in maximum deposits and maximum loans. As competition increases consumers will move the the better bank. In the economy graphs section there will have to be 2 new graphs which represent average per capita savings, and borrowing capacity. These values are heavily connected to the economy and unemployment rate. Then in order to balance it out the consumers will also have a interest rate threshold so that if Inflation>Savings Interest then they will only deposit 50% of what they should and something similar for Central Bank Rate and Borrowing rate. People can also default on their loan based on economic position,GDP growth,unemployment rate and maybe average wage. Then we can have it so that the loans get filtered into multiple categories that have a different probability of paying back by using a ranking system using a system of "1 - 100". where 1 is the least stable but highest interest rate and then you can determine how much of each type of loan to give to manage risk better. Then there also could be selling loans to other people like they do with mortgages nowadays to make money for more of them.
Then we would also need a way for bank to make money using fractional-reserves. What this means is that if you have $10 mil in deposits and the ratio is 1:5 you can lend out $500 mil. You can set the max ratio at the start and then you can adjust the rate for your own bank.
Summary:
Enterprise
Bond System - Either Issue bonds yourselves and wait for people to buy them to get the money, or have it underwritten for a fee by another corporation
Consumer Banking - Ability to have banks that you can then adjust the amount of interest people get for depositing or pay for a loan; able to control how much in savings and debt you have
I.
The First method involves simply borrowing as much money as you want and interest and only when people buy them do you get the money, essentially letting the market decide the credibility of the business in question.
II.
This method involves getting the money instantly by going up to business that offers "underwriting" services the ability to negotiate with you to issue bonds over the interest rate,and the total principal of the issue. Then they negotiate involving the amount of fees they will receive, afterwards they have the option to sell the bonds to the market with a lower interest rate as a way of making profit.
Example of deal progression:
I.
Company A asks for $1 billion,5% -> Issues on market -> Company B Buys $5 mil worth of bonds - ----- Now Company A bonds worth $95 mil are left and Company A receives the $5 million
II.
Company A asks for $1 billion,1% underwriting from Company I -> I refuses and offers them $1 billion 5% -> Company A agrees and receives the 1 billion and begins paying interest -> Company I now issues the bonds at a rate of 2% on the market and every year takes the gap of 3% for the bonds
There is also a portion that involves consumers and the creation of a consumer banking system by companies. How it works is that consumers can deposit or borrow money from a bank which can only move a certain amount of Savings and Loans a day. Now you can as a global setting adjust how much money you are allowing to have in maximum deposits and maximum loans. As competition increases consumers will move the the better bank. In the economy graphs section there will have to be 2 new graphs which represent average per capita savings, and borrowing capacity. These values are heavily connected to the economy and unemployment rate. Then in order to balance it out the consumers will also have a interest rate threshold so that if Inflation>Savings Interest then they will only deposit 50% of what they should and something similar for Central Bank Rate and Borrowing rate. People can also default on their loan based on economic position,GDP growth,unemployment rate and maybe average wage. Then we can have it so that the loans get filtered into multiple categories that have a different probability of paying back by using a ranking system using a system of "1 - 100". where 1 is the least stable but highest interest rate and then you can determine how much of each type of loan to give to manage risk better. Then there also could be selling loans to other people like they do with mortgages nowadays to make money for more of them.
Then we would also need a way for bank to make money using fractional-reserves. What this means is that if you have $10 mil in deposits and the ratio is 1:5 you can lend out $500 mil. You can set the max ratio at the start and then you can adjust the rate for your own bank.
Summary:
Enterprise
Bond System - Either Issue bonds yourselves and wait for people to buy them to get the money, or have it underwritten for a fee by another corporation
Consumer Banking - Ability to have banks that you can then adjust the amount of interest people get for depositing or pay for a loan; able to control how much in savings and debt you have