Banking and Finance DLC — Tips and FAQ

The Banking and Finance DLC adds two businesses that run on other people’s money — banking and insurance — plus the financial instruments to go with them: corporate and municipal bonds, sovereign bonds, a global stock market, stock splits and special dividends. This page collects the numbers that matter, the trade-offs behind them, and the questions that come up most often.

In this guide:

• Requirements at a glance
• Running a bank
• Capital, defaults and the balance sheet
• Insurance
• Bonds
• Stocks, splits and dividends
• Money supply and venture capital
• FAQ

Requirements at a glance

Running a bank

Deposits are the raw material — the interest rate is the tap

A bank’s profit is the spread between what it earns on loans and what it pays on deposits, so the whole business starts with gathering deposits. Four things decide how much you attract: the deposit interest rate, the quality of service, the brand rating and the branch’s location (see the customer traffic index at the top right of the branch screen). Of these, raising the deposit interest rate is the most effective — and the Competition page shows exactly what rivals are offering and what share they hold, so you can see whether a rise is needed before making one.

Note that the rate is a bank-wide setting: you set the 1-year time deposit rate and the game derives every other term from it, including saving accounts and 6-month, 2-, 3- and 5-year deposits. The same applies to the staff training budget — the slider on the HQ Overview page applies to every branch at once. See Bank Headquarters and Bank Branch.

Watch customer waiting time, and open branches before it bites

Quality of Service comes from staff skill level, and once customer waiting time passes 30 it starts dragging that quality down. The fix is more branches, not more training. If the City Economic Simulation DLC is enabled, staff skill is also affected by the education level of the city’s residents — another reason to care about schools when you are also the mayor.

Brand is set city by city

The bank’s brand rating is per-city, and it is raised by advertising from the individual branch in that city, not centrally from headquarters. A bank that is famous in one city starts from nothing in the next.

Choose your risk appetite deliberately

The Loans page lets you set New Loans Allocation across borrower credit ratings — it starts even, at 20% each. High-interest loans to weak borrowers are a double-edged sword: in a boom, aggressive lending produces high interest income with few defaults; in a recession, the same book produces heavy write-offs. The Loan Defaults page shows default rates by credit rating, and poor-rated borrowers default at many times the rate of good ones. Decide which kind of banker you are before the cycle decides for you. See Bank Loans.

The ratio to watch every year

Loan-to-deposit ratio is total loans divided by total deposits. Lend too much of your deposits and you risk not being able to meet withdrawals; lend too little and idle deposits earn nothing while you still pay interest on them. 80–90% is the sweet spot. Set a maximum on the HQ Loans page and the bank stops issuing new loans when it is reached; an absolute ceiling for every bank, yours and the AI’s, is set in the new game settings.

Capital, defaults and the balance sheet

A bank keeps its own books

Unlike other firms, a bank is not consolidated into the corporate balance sheet — its huge deposit and loan balances would distort the parent’s accounts. On the bank’s own balance sheet, customer deposits sit as liabilities (you owe them, and you pay interest) and loans to customers as assets (you expect interest and principal back). Net assets — total assets minus total liabilities — are the shareholders’ equity the regulator cares about. See Understanding Bank Capital Requirements.

What happens when capital runs short

If the Bank Capital Ratio falls below the required level, the default behaviour is an alert window demanding that you inject capital from the parent. You can change how the game tells you, on the bank’s Balance Sheet page:

• Must Take Action — the pop-up. The default.
• Notification Only — no pop-up; the bank stops issuing new loans, shows an icon on the Overview and Loans pages, and flags the Event Tracker at the bottom left.
• No Notification — lending stops silently. The documentation does not recommend it, and neither would any bank regulator.

Taking money out of a bank has two locks on it

Transfers run both ways between a bank and its parent, but the amount you can take out is limited by two rules at once: the capital ratio must not fall below the required ratio, and the loans-to-assets ratio must not exceed its maximum. Plan on a bank being a place capital goes to live, not a cash reservoir for the rest of the group.

Insurance

Underwriting is optional; investing is the point

An insurance company makes money two ways: underwriting profit (premiums less claims and expenses) and investment profit. The claim reserves it holds against future life insurance claims are liabilities, but until those claims fall due the money can be invested in stocks and bonds — bond interest, dividends and market gains all flow to you. It is entirely possible, and documented, to lose money on the insurance business itself while making a large profit overall. See Make Investments Using Other People’s Money.

To invest with it, select the insurance company on the stock market or bond market screen — it is marked with an icon in front of its name. The holdings appear on its balance sheet as Stock Assets and Bond Assets, and the returns as Investment Income.

New policies are the number that predicts the future

Life insurance policies are assumed to last an average of 30 years, paying premiums every year until they mature. So premiums from new policies is the leading indicator: a company writing good numbers of new policies year after year is building a growing stream of income for decades. Existing-policy premiums tell you about the past. See Insurance Headquarters.

The other two lines have knowable market sizes

• Home insurance — market size follows city population, assuming 3 people per household and that 80% of households buy cover.
• Car insurance — market size follows car ownership, which is proportional to the city’s real wage rate: 40 cars per 100 people at a real wage rate of 100, scaled from there.

That makes car insurance a bet on prosperity and home insurance a bet on population. In a poor city, the car insurance market is small no matter how good your product is.

Competitiveness has four parts

Price, quality of service, brand, and the locations of your front offices (customer traffic index). Service quality works exactly as in banking — staff skill plus waiting time, with the same threshold of 30 — and the cure for long waits is more front offices to share the load.

Bonds

Bonds are usually cheaper than bank loans

Issuing corporate bonds generally carries lower interest expense than borrowing from a bank, which makes it the preferred way to raise money for expansion. Issue from Financial Actions (F11) → Issue New Bonds: set the quantity and a term of 5, 10, 15 or 20 years. The coupon rate you must pay follows from two things — a longer term and a lower credit rating both raise it. Ratings run AAA, AA, A and BBB (investment grade), then BB, B, CCC, CC, C and D (junk). See Corporate Bonds.

As an investor, watch the central bank

On the bond market (Ctrl-B) a bond’s price moves with the issuer’s credit rating and with interest rates: when the central bank hikes, virtually all bond prices fall, because investors demand more. That is what makes rate cycles tradable — and what makes a portfolio bought at the top of a rate cycle painful. Yield to maturity is the return you actually get: buy a $100 bond at $90 and your effective return beats the coupon rate.

Two moves people miss

• Buy back your own bonds. When the market price is well below what you issued at and you have spare cash, repurchasing them cuts your future interest payments — a rate spike is an opportunity for a liquid issuer.
• Sovereign bonds are always available. Corporate and municipal supply can dry up, but US Treasury Notes of 3, 5 and 10 years exist in effectively unlimited quantity — a reliable home for idle cash, particularly for an insurance company. See Sovereign Bonds.

With the City Economic Simulation DLC enabled, municipal bonds issued by city governments appear on the same market, and the buttons at the top filter between corporate, municipal or both.

Remember that a bond must be redeemed

At maturity the issuer has to pay the principal back. If the cash is not there, it must be found — new loans, or selling assets. And if the issuer goes bankrupt, the bond defaults and its investors may lose everything. The “Out of Cash” screen now offers a bond issue as one way out, which is useful and also a warning sign.

Stocks, splits and dividends

The global market exists because the local one is thin

Local stock markets have low trading volumes. When your investment appetite outgrows them, press Ctrl-G (or the icon at the bottom right of the Stock Market window) for the global market and its large-cap, highly liquid names. Press a to switch the view to Cumulative Performance over 1, 3, 5 and 10 years, which is a far better basis for judging a stock than its current price. See Global Stock Market.

Special dividends are not limited by profit

Unlike the annual dividend, a special dividend is capped only by the lower of the company’s cash and its retained earnings, and there is no limit on how many times a year you can pay one. That makes it the tool for moving accumulated cash out of a company you control — your own, or a subsidiary you hold at least 75% of. See Special Dividends and Stock Split.

Money supply and venture capital

Realistic Money Supply makes capital genuinely scarce

With the City Economic Simulation DLC enabled alongside this one, Realistic Money Supply replaces the assumption that public investors always have money. A pool of Public Investors’ Money is shown at the top centre of the screen; it falls every time any company raises funds through new shares or bonds, and it refills over time at a rate tied to National GDP. When it hits zero, nobody can raise anything until it recovers. IPOs, share issues and bond issues all become things you time rather than things you do. See Realistic Money Supply.

Venture capitalists are the answer to that scarcity

VCs hold billions, invest only in pre-IPO rounds, and hold for the long term rather than trading. They are the funding route that still works when public investors are tapped out — which is why the game automatically assigns at least 5 when Realistic Money Supply is on (unless Survival Mode is also enabled, where scarcity is the point). Find them at the bottom of the Person report.

Two settings shape them, and they interact: VC Capital Size and Investment Diversification (the largest share of net worth a VC will put into one company). A $3 billion VC limited to 5% writes cheques of up to $150M and can back 20 companies; a $5 billion VC limited to 4% writes up to $200M across 25. Setting the number of VCs to zero disables the feature. See Venture Capitalists.

Settings worth knowing before you start

• Realistic Loan Demand — loan demand becomes finite and tracks the total GDP of all cities, shown as a Loan Demand indicator on the HQ Loans page. When demand dries up, your deposits sit idle while you still pay interest on them — which is why this setting also unlocks a threshold for refusing new corporate deposits once cash is too large a share of assets.
• Savings Rate Modifier — how much of their money citizens deposit. The single biggest dial on bank profitability.
• Economy’s Impact on Loan Defaults — how violently defaults spike in a downturn. Set high, an aggressive loan book becomes genuinely dangerous.
• Bond Credit Standard (Loose / Normal / Tight) and Bond Issue Limit (a multiple of capitalization) — together these decide how much debt anyone can raise and at what cost.
• Percentage of Player Capital Funded by Bond — start the game already in debt, paying interest and facing a redemption. For players who find the opening too comfortable.

See New Game Settings.

FAQ

I built a bank branch and nothing happens. What did I miss?

A Bank Headquarters. Branches require one to exist first, and half the capital you spend on the HQ becomes the bank’s operating capital.

Why is my bank barely profitable?

Look at the loan-to-deposit ratio first. Below the 80–90% range, deposits are sitting idle while you pay interest on them. Then check whether your deposit rate is competitive — the Competition page shows every rival’s rate and market share.

How do I attract more deposits?

Raise the deposit interest rate; it is the most effective lever. Service quality, brand rating and branch location all contribute as well, and brand has to be built city by city through each branch’s advertising.

My branch’s service quality is falling but staff skill is fine.

Customer waiting time has probably passed 30, which is where it starts pulling quality down. Open another branch in that city.

Why did my bank stop issuing loans?

Either the loan-to-deposit ratio hit the maximum you set, or the Bank Capital Ratio fell below the required level. The second one may be silent depending on which notification mode is selected on the balance sheet page.

The game keeps demanding I inject capital. Can I make it stop?

Yes — switch the mode on the bank’s Balance Sheet page to Notification Only. The bank will stop issuing new loans and alert you through the Event Tracker instead of interrupting you. No Notification exists but is risky, since the capital ratio can then deplete unnoticed.

Why can’t I transfer cash out of my bank?

Two limits apply at once: the capital ratio must remain at or above the required ratio, and the loans-to-assets ratio must remain below its maximum. Whichever binds first caps the transfer.

Should I lend to high-risk borrowers?

It depends on the economy and on the Economy’s Impact on Loan Defaults setting. High-interest loans pay well in a boom and default heavily in a recession. The New Loans Allocation page is where you set that appetite deliberately rather than by accident.

Where do I borrow money now?

From commercial banks run by corporations — there is no central bank lending facility in this DLC. Each bank offers you its own credit limit and rate, longer terms cost more, and you can borrow from your own bank if you have one. Financial Actions, F11.

I withdrew a time deposit early and lost the interest.

That is the rule: withdrawing before maturity forfeits the interest, and the game asks for confirmation before cancelling the deposit. Use a saving account for money you may need.

Bonds or a bank loan?

Bonds, generally — they carry lower interest expense. The exception is when your credit rating is poor or you need a long term, since both push the coupon rate up.

Why did all my bonds lose value at once?

The central bank raised interest rates. That hits the whole bond market, because investors now demand higher returns from bonds in general. Individual bonds also move with their issuer’s credit rating.

Can I get rid of expensive bonds I issued?

Yes — buy them back on the secondary market. It is most attractive when the price has fallen well below what you issued at and you have the liquidity.

My insurance company is losing money on insurance. Should I close it?

Not necessarily. Underwriting profit is only half the model; the claim reserves you hold can be invested in stocks and bonds, and a company with negative underwriting profit can still be very profitable overall on investment income.

Why is my car insurance business so small in this city?

Car insurance market size follows the car ownership rate, which is proportional to the city’s real wage rate. A low-wage city simply has fewer cars to insure.

Why can’t I do a stock split?

The share price must be above $100.

How do I get cash out of a company without waiting for the annual dividend?

A special dividend, from Financial Actions. It is not limited by profit — the cap is the lower of cash and retained earnings — and you can pay one as often as those two allow, in your own company or a subsidiary you hold at least 75% of.

Why can’t anyone raise money in my game?

Realistic Money Supply is probably on and the Public Investors’ Money pool has run down to zero. It refills over time, at a rate tied to National GDP. Venture capitalists are the alternative source while you wait.

Read more

Banking: Bank Headquarters · Bank Branch · Bank Capital Requirements · Bank Deposits · Bank Loans

Bonds: Corporate and Municipal Bonds · Sovereign Bonds

Insurance: Insurance Headquarters · Make Investments Using Other People’s Money

Stocks: Global Stock Market · Stock Split · Special Dividends

Settings and extras: New Game Settings · Multiple Floors for Warehouses · Realistic Money Supply · Venture Capitalists

Don’t have the DLC yet? See what the Banking and Finance DLC adds.