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Topic created : 24 July 2011, 16:07

JustNash

Premium Brands

it's probably been suggested before, but since I've felt the need for a bank for 2 different reasons in 2 different realms, I'll suggest it again Well

Moreover: banks are a substantial part of the real economy anyway. Adding them would enhance the realism of the game.

I have two main suggestions, but both definitely would require a lot of review by as many other players as possible! Also, there are many more alternatives.

1. System bank
offers a lowly fixed rate on your cash
offers loans of up to 50% of your net asset value at a reasonable rate

Added value to the game:
the lowly rate on cash isn't really necessary in my opinion, but it does add realism as you get interests in real life also
the loans are important though. You carefully need to prepare your business plan to see how much downpayments you can handle. Your growth is less dependant on cash constraints.

2. Player banks
This takes more programming work, but might add a lot of fun. Like you have qualifications for commerce, production, ... you could have a qualification for banking. Prerequisite to start a bank could be management skill 20 or something though.

Only savings & loans banks are available. So you need to attract deposits (higher rates) and find companies that want to take out loans. To start, you would need to provide the bank with capital. The maximum amount you are allowed to loan out is the lowest of:
* 10 times the capital
* 5 times the deposit base
To finance the loans given out, cash can be borrowed at the central bank at say 2%

Examples:
You deposit 1Bn as starting capital for your bank. Within a week, you've attracted 500M worth of deposits at 2.5%. You can loan 2.5Bn (5 times the deposit base) now. Say you do this at 2.5% also, then your profit margin is 0.5% on the 2Bn you get from the central bank, or 10M. This obviously isn't profitable as just depositting your 1Bn at a similar bank would offer more. Applying a loan rate of 3%, changes this already though.
Or even better: attracting more deposits! Say your deposit base goes up to 3Bn. You could then give loans totalling 10Bn (10 times capital). Even at a rate of 2.5%, you would be gaining 35M on your capital investment of 1Bn, which is far more than without any investment.

Some dynamics:
the size of the bank is tied to your banking qualification. Maybe at Q1, you can only manage 250M in deposits. Maybe it takes Q20 to manage 100Bn in deposits.

You have to be careful with the loans you give out. They should always be collateralised though (standard). In the event of default, the bank owner gets the collateral. But then still there is the duration aspect. Deposits can be taken away on a daily basis. Loans will vary from 1 day loans to who knows how long. If deposits are retracted, you need to be able to lower the loan portfolio quickly or pay penalties. Alternatively, you could decide not to use the full potential of loans.

What are your thoughts?

Nash

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24 July 2011, 18:35

Last time edited : 24 July 2011, 18:36

._. Inc

I think it's a great idea, I specially like the "player banks"! Yes

In the meantime, while the virtonomics admins decide and eventually implement what you suggested, what do you think about a bank organized by the players (a bit like the startup fund in Mary)?

In another thread I posted the following idea:

DotLineDot
The lack of a bank is quite regretful.
I would be interested in "organizing" one.
The main difficulty is that the game makes it very hard to transfer money without transferring goods (maybe more experienced players like turkbostjan could help here).

My idea:

TO GET A LOAN
1. the player who needs cash sells some assets to the bank through the Enterprise market (is cash immediately credited? I hope so...);
2. the player signs a repurchasing agreement, in which he agrees to repurchase his assets from the bank in X weeks;
3. on week X the bank sells the asset back to the player for the original price + interest;
4. eventual profits generated while the asset is owned by the bank will be subtracted from the repurchasing price;
5. eventual losses generated while the asset is owned by the bank will be added to the repurchasing price;

Repurchasing price = Original price * (1 + interest rate) ^ X - profits + losses

TO MAKE A DEPOSIT
1. the player who has more cash than he needs buys some standard good from the bank (grain maybe?) for a very high price;
2. the bank signs a repurchasing agreement, in which it agrees to repurchase the good from the player in X weeks;
3. on week X the bank buys the good back from the player for the original price + interest;
4. holding the good will generate a little cost, but it should be negligible;

Repurchasing price = Original price * (1 + interest rate) ^ X

Obviously, the interest rate on deposits will be much less than on loans...
The method for making deposits is simpler than the one for loaning money, but the player in need would get the loan-money fast (same turn), I think this is important.

Let me know...

http://virtonomics.com/mary/forum/forum_new/11/topic/102228/view/m:99913491/#99913491 ...

24 July 2011, 23:23

JustNash

Premium Brands

the end results are more or less the same. Probably up to the rich players to decide whether or not they wish to do this though. It takes quite some coordination and follow-up.

And there is no collateral. Unless you are talking about selling subdivisions. That kind of hollows out the point a bit as this means that you take away an element that will cause your qualification to grow.

But IF it is legal, and if big players wish to loan me money by buying my products for ridiculous prices, I am definitely interested in borrowing it. Although I have no idea what a fair loan rate would be Well

24 July 2011, 23:36

._. Inc

There IS collateral because I'm talking about selling subdivisions (=assets). To wink

Growth in qualification:
Ok, you cannot have everything (the money of the loan + the subdivisions for your qualification growth).
But you could sell to the bank (and then repurchase after some weeks) a non-performing asset (like a warehouse) or a less performing asset than what you are going to build/expand with the loan money.

E.g. you have a Mill and a Lapidary factory.
The Mill makes $100.000 profit/week
The Lapidary factory makes $1.000.000 profit/week

You could give the mill to the bank as collateral, get a loan and expand the Lapidary factory which is more profitable...

What do you think?

24 July 2011, 23:42

._. Inc

If you want to try it out, I'm ready to lend you, let's see... up to $50.000.000 for 1 week, just to see if it works.
Very we!

25 July 2011, 00:11

JustNash

Premium Brands

if some veteran player could comment on the legality, I'm willing to try it. I've got some underperforming assets I don't mind giving up for a while. :-)

Although, there is an issue there too: what if the asset I sell you has a daily profit of say 100, but as you have no interest in it, you neglect it and it brings in only 50 a day?

Now, obviously, the inverse is more likely to happen: you might get 150 a day. That's 50 a day for me in this example. I stand to make money on the loan itself! :-))

25 July 2011, 00:29

Zardiz

Zardiz Industries

Like the Idea, very much of the banking system Well

THUMPS UP

Regarding buying and selling goods at low and high price, i'm quite sure it's ilegal in the game.

Remember that you can not decrease and increase the price og a factory more than 70% - 300% of the asset price!

25 July 2011, 00:31

Last time edited : 25 July 2011, 00:33

._. Inc

JustNash
if some veteran player could comment on the legality, I'm willing to try it. I've got some underperforming assets I don't mind giving up for a while. :-)

I see no problem, after all it's just a private agreement between us: you sell me a subdivision with the promise of buying it back after some time (tomorrow, in the present case).
But I'd be happy if some other player (or an admin) would comment.

JustNash

Although, there is an issue there too: what if the asset I sell you has a daily profit of say 100, but as you have no interest in it, you neglect it and it brings in only 50 a day?

Now, obviously, the inverse is more likely to happen: you might get 150 a day. That's 50 a day for me in this example. I stand to make money on the loan itself! :-))

This is a real problem: obviously the bank cannot lose time managing the fine works of the debtor's division(s).
Therefore you should select some assets which:
1. Don't need to be actively managed;
2. Possibly have a high value.

Warehouses full of stuff you don't immediately use or laboratories or inactive factories.
Stores wouldn't be ideal, generally I lose much time managing mine!

25 July 2011, 15:53

JustNash

Premium Brands

@ ._. sorry, cannot help you with that. I don't even have a warehouse, my lab isn't worth much + I'm using it for a quest. And I definitely don't have any inactive factories :-) Turning back to the banking suggestion. Thanks Zardiz for the positive feedback. Let's imagine 100% of the players totally dig this idea, what would happen next? To be clear: I do not expect 100% of the players to like the suggestion. What's more, I would like to hear from the ones that don't like it too Well

18 August 2011, 15:49

Arrigus

I kind of like the idea of banking, but would like to put a different spin on it. I think a simple way to get it started would be to have a system bank. Using leverage to expand a business is how most get to their big growth stages and I think 3 to 5 times leverage of assets being somewhat reasonable. However to keep players from blowing their brains out with too much leverage, each corp could have a rating like AAA, A, B-, etc..., depending on the ratio between liabilities and assets. The interest rate you would pay on your loans would also depend on your credit rating, the lower the rating, the higher the interest rate. The bank would also adjust the amount it is willing to loan as your credit rating got higher or lower, more money for good credit, less for poor credit. It would force players to be careful about how they spend money and make decisions. Default would be the bottom line for players and would have to restart, putting all assets on the open market in some sort of distressed category. I am finding there is no real risk in this game once you get established and takes some of the thrill from doing business in the Virtonomics world.

I am not keen on the collateral idea as I believe it would get too confusing for the players to keep track of, but keep talking and maybe we'll hit the right idea.

Another way for players to create investment would be for the ability for all corps to issue bonds. Bonds could be issued with the terms being from 1 year to 20 or 30 years, the Virtonomics world moves very fast. It should be up to players to decide how much they wished to pay for an interest rate and it would be useful to be tied to a credit rating. These could be issued through banks or brokerage houses as the only means to get them to market, with the house or bank taking a small percentage for the service. I like the idea of creating a new qualification of banking or money management to be able to provide this service.

These are just a few thoughts to spur some debate.

Arrigus

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