Poll Would you want Playable banks if it was possible?

[Nebogipfel]

Hi baz,

I´ll work out a small framework.

Just need some time to think about possible solutions.

[baz]

Nice one Nebogipfel,
Look forward to seeing your thoughts. I'll help where I can mate.

[draconis]

Another great improvement would be the option to issue bonds.

[Nebogipfel]

Ok let´s face it. Most of us want a kind of investmentbank. But we have to be careful not to get to close to the processes the player is already doing with his company.

So after thinking about it, I found that we maybe start with a privat saving bank (Don´t know the correct english word).

Let me explain:

This kind of bank offers a very different (unique) gameplay, because you get money from fo example:

- 1. get money from employees and your job will be to invest this money in a way, that you can pay the interest rate. Even

more, if you wanna make profit.

- 2. borrow money from the Central Bank to invest. In that case we could think about that companies aren´t allowed to

get directly money from the Central Bank.

To the first point: Getting money from the people.

a)You have a 1000000 ppl town.

b) Wage rate is 40.

c) Customer interest index is a variable, defined by advertising and good interest rates, offered by your bank. I start with .
0,1.

So your starting asset (First year!) could be:

(1000000) * (40) * (0,1) = 4.000000

To pay your customers interest rate (for example 3%), it´s neccessary to generate:

4.000000 * 1,03 = 4.120000

So after one year you have to pay 120000 back. Everything above is your profit. (Don´t forget inflation!)

So usually the interest rate should be enough to cover inflation, otherwise your customers will disappear.

There are some variables to think about.

The wage rate. You should have a look at this, because people earning more money are more interested in spending a part from it to your bank.

The customer interest index is as I wrote above defined by interest rate and advertising.

If we set the standard at 0,1 and you rise the interest rate significantly lets say 6%, it could look like this.

Standard with 3% : 0,1 * 3 / 3 = 0,1

Rised with 6%: 0,1 * 6 / 3 = 0,2

For my example with my 1000000 ppl town it would look like this:

(1000000) * (40) * (0,2) = 8.000000

So your capital in the first year would be 8.000000.

But be carefull, because you now have to pay:

(8000000 * 0,06) = 480000 back. (after one year )

Next modifier would be advertising spending, but I have no clue how it could inflict the customer interest index correctly.

Maybe someone has some ideas.

The numbers I used here are just examples. Everything is replaceable.

Next step would be, how to invest the money ?

Ok, stockmarket, real estate shouldn´t be a problem.

But we need something special, otherwise you´re doing the same stuff as you do with your company.

As I mentioned before, one proposal is, as a company it is not allowed to borrow money directly from the Central Bank. Then other banks are really making sense.

As suggested before, some kind of bonds would be great to place at the stock market. (But not your own!)

How about insurance and reinsurance ? We could offer reinsurance, for the case the customer isn´t able to pay his credit back. That would add an interesting point.

I´m not sure about the implementation of bonds, so any feedback if it is possible would be great.

In closing. That´s no framework I know, but it wanted to work out an idea I got, while thinking about an implementation of investmentbanks. I think the concept itself is quite handy.

What do you think about ?

Regards

[Bigs]

Very interesting read! I like the idea!

[alex011]

i think running an investment bank would be difficult and more difficult to make it profitable because the financing options in this game are limited.When you start a new company here,basically you invest your own capital (and the AI ). So the inv. bank will not generate income untill a company start borrowing.
A bank here should have a retail depanrtment ,to generate profit from the population. As for the investment bank some new features should be added in the game,such as : underwritting the issuing of new shares, corporate bonds ( again underwritting and the option to buy some bonds in order to generate profit from the coupon payments ) and the option to start the game on leverage.
my english isn;t so good ,so i hope you understand

[Nebogipfel]

thanks Bigs.

And Alex, you´re right. To implement an investmentbank is not easy, because your need many new features to get the gameplay interesting and realistic. That´s why I worked out the idea of a saving/retail bank.
Maybe not very realistic, because in the end you work a bit like an investmentbank. But it´s practicable and most features you need for calculation are still in the game.

Next qusestion would be in which way should a bank be placed in the game.

Maybe we use the same menu as we do with media companies. So all options have to be placed there. Possible ?

I think, treating banks like a headquarter wouldn´t work without many coding changes.

Factory/Supermarket layout doesn´t really fit for the needs of a bank.

Managing a bank should not evolve as time-consuming as developing your company. It would simply ruin the gameplay. So most things should work with some settings you have to modify and the possibility to let it run most of the time without tweaking, like we do with media firms. Maybe some message windwows, if a company requests for a credit or something happens at the stock-market.

Some thoughts ?

[alex011]

i tottaly aggre! factory/retail or headquarter layout wouldn't work.
I was thinking something like retail-investment bank ( jpm chase or citigroup).
As you mentioned before companies or individuals can't borrow straight from the central bank, so a bank is essential and their profits are based on the interest rates( they borrow at 1% and lend at 5% ). This could work because sometimes in the game the wage rate<spending level, so either they spend their own ''saved'' money or they borrow.
As for the investment part of the bank, they can simply act as stock brokers,although i don't like giving them MY money.
I haven't thought about the managing option yet but i think some listed banks on the stockmarket would be nice.

[vek_60]

Oh no, I'm finally making my first post! Long time reader, been planning to make more posts too, but this one has me interested as the thought has crossed my mind before.

I think an investment bank could be fine, but it sounds like a lot of work to implement. A "Retail" bank like most people deal with in their day to day life sounds easier, and to me more interesting.

I think an interface similar to the media firm would work ok.

Here's the framework I would envision.

You have a town with a population of whatever. There should be "government owned" or perhaps simply AI banks to start with in every town. You could buy or build more. I think it should be something like 50 percent of the population (to take out children and irresponsible people!) has an inclination to save a certain amount, as a percentage (say 10 percent), based off their wages. This amount could easily be a variable based upon the economic conditions as well to make it more realistic.

So a city of 2 million, has 1 million savers, average annual wage of 50,000 per year, which equates to wages of 50 billion a year. They save 10 percent of that(to make the following math easy!), or 5 billion a year. This could be a point of contention as to how "realistic" you want it to be, and those numbers could be say cut to a 10th (500 million) or even 100th (50 million) or whatever to make the numbers friendly for the game. You should then also have some figure for what the desired borrowing amount per citizen is a year. I'd say something roughly equal to the savings rate, perhaps slightly lower to allow corporate loans (more below).

I'll roll with the full amount for illustration. So, you could have all the banks in a town competing for getting that money. They would do so via the interest rate they set to pay customers. It could also even be effected by proximity of branches (have multiple!) around population centers as with stores. If you had 10 banks operating in the city, the average would be 500 million deposits a year for each, some with more, some with less, based on number of branches, perhaps advertising, their "customer service" (more below), and of course their interest rates.

You could then have an "overhead" expense as with a media firm. The new content development bar could be "quality of service" or "customer service" for the bank. The rate you pay could be the CPM. Then a "rate you charge" bar would be needed.

Now, I think to make it work you need to have it just like media firms where there are "local customers" who borrow from you, based on how competitive your rate you charge for loans is, just like local advertisers do with media.

Say you pay 8 percent to depositors, and charge 10 percent. You're aggressive with the rate you pay, and with the rate you lend at. So you end up with 1 billion in deposits (20 percent market share of the 5 billion total saved), and demand for 1 billion in loans. Perfectly balanced

Just as with a media firm, if you offered your loans to customers at say 9 percent, which is significantly cheaper than other banks for this scenario, then you might "sell out" all your capitol because there would be demand for 1.5 billion in loans but you only have 1 billion to loan out. Just like maxing out your advertising time. Conversely if you offered to pay interest rates of only 5 percent, you might only get 250 million in deposits, but you might be able to get sufficient demand at 12 percent on loans to the public that you'd be able to use up 250 million even at the high rate... If say you had several branches, and spent well on your "customer service" to attract customers.

It would be just like anything else. Supply and demand. You could be a low margin high volume company, or you could be a high priced company with huge margins and low volume.

Then as far as ultimate profitability you need to factor in overhead, what you spend on "customer service", advertising if that feature were to be put in. So if you took the pay 8 percent, loan at 10, on 1 billion in deposits the net result would be gross profit of 20 million (assuming you had enough demand to loan out the full 1 billion). You take out the expenses, and voila! Maybe the bank nets 10 million or whatever.

It's pretty close to how it really works, and as you can see even using realistic numbers a bank isn't necessarily going to make THAT much money. That would be a bank 20 percent of the savings market share in a city of 2 million with highish wages... A farm or retail store can net that, and that could even require multiple branches in a city to get to that market share level.

But keep in mind that's only 1 years worth of deposits. At 10 years, the numbers could theoretically climb 10 fold. So the question is, should a 2 or 3 branch bank in a major city be able to net 100 million a year? What about when it's 30 or 50 years old? Is half a billion a year fair? As I said, it would be easy to simply drop the numbers by 10 fold or something to keep numbers "smaller" if people have a problem with that. That said, I think if you had the gumption to stick with building a bank for 50 years, it's not unreasonable because your main company ought to be making billions and billions by then too. OR if you were to buy a bank making that much it would be a 5 or 10 billion dollar purchase. But whatever other people think.

One could also create some variable that "ages" your savings deposited, so when people "retire" or something the savings goes away, which means you could reach a cap based upon market share, the size of the city, how big your deposits were over time, etc. This could be something like a 50 year rule, which would I think limit banks to reasonable amounts of income/assets, and be realistic to boot!

Other things worth mentioning. If you drop your pay rate, you would lose deposits, eventually to the point of needing to infuse capitol to retain outstanding loans. This could be accomplished via your main company giving the bank money(or depositing), or as has been mentioned a central bank. If a central bank is to exist, I think it should provide VERY tight margins for the given economy. Otherwise you could just endlessly borrow from them and loan out. Central bank should be last resort to keep a bank solvent, and focusing on the retail banking should be key. People who want to be aggressive in banking though should in theory be able to make some small margin from central bank loans.

Now if you want to get into cool stuff, you could also factor in loans to companies. I think this should be able to be handled 2 ways. Have an "auto pilot" function that allows the bank to loan automatically to interested companies if they meet criteria. Could be something very simple like profit. If it's above 0 do it(AKA Profitable), or if it's above a margin of 10 percent on gross sales. P/E ratio. Could also use years in business or whatever other easy to program basic criteria. If they meet one or 2 implemented criteria your bank gives them a loan without bothering you, up to an amount determined by multiplying their profit to come up with a figure. Maybe that setting could be adjustable so if you want to be "crazy" you would loan companies 20 times their profit!

You could also have a definite "no" setting. Perhaps in between those settings it could prompt you. If you want to run total auto pilot, you set your definite no setting just below your auto yes settings, and you never get bothered. If you want to "take a chance" an offer screen could come up and you could take a look at the companies financials and decide. Perhaps counter offering them with a rate higher than your standard as you can do with proposals to buy tech. This could also occur if a company meets your criteria, but wants more money than your profit multiplier allows.

As far as broader things, the economy should of course effect savings rates, the amount of loans people are after etc. There should be a certain number of defaults within the normal course of business that gets factored in, also tied to the economy so it goes up when things are bad. That stuff should be fairly simple calculations to tie to this table or that though.

Also for your rates there should be a way to auto tie that to the inflation rate as other things will apparently be able to, so that could be left auto pilot as well, or you could choose to handle it manually. That's how banks do it in real life anyway! If you set stable margins that are good in good times, you should be able to maintain barring making a crazy corporate loan in bad times. Profits might shrink, but barely dip into the red if at all.

With the investment bank stuff, I don't see the point personally. You COULD do stuff with underwriting bonds and all that kind of madness, but as far as simple stock purchases I fail to see the thrill. Buying shares in a company that's "called" a bank vs a normal company seems to make no difference to me in my head. I think the retail bank I laid out above sounds simpler, and funner.

On the issue of who should own a bank... I dunno. It seems like you SHOULD be able to own it in your company... But it also seems like the bank should have it's own funds separate because it needs to keep reserves, and always having to have your company hold money seems iffy. If a way was made to separate those funds while still being owned by your company that could be ok.

I do think your company being able to "deposit" money into the bank, or buy bonds, or whatever you want to call it would be good. Then the company could itself get paid interest on cash it can't use elsewhere. You company should probably also be able to borrow money back out. As far as keeping you from abusing loaning money to yourself (think offering good rates to lots of consumers merely to loan back to yourself at minimal markup), I think consumer loans should perhaps take preference, and you should have to borrow at your own loan rate you set. Maybe make the overhead of a bank prohibitive to that making much sense, to where you'd practically just want to go to another bank that exists as opposed to start one just to loan to yourself. More thought should go into that aspect.

In any event I've typed waaay too long a message... But that's how I roll. I really like to cover things in detail, but for my first post i think I'm calling it quits here! Whadda you guys think?

[Nebogipfel]

Very good job vek.

I need some time to go to all the details, but most of your ideas do make sense.