Banking and Financial DLC design draft

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David
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Banking and Financial DLC design draft

#1 Post by David » Sat Nov 04, 2017 8:41 am

Here is the first part of the design draft for the Banking and Financial DLC. Any comments and suggestions are welcome.

Retail banks will compete with each other to get more customer deposits. This can be done through increasing their deposit interest rate offers.

A bank will have to use the money to lend out loans, and optionally invest in bonds and stocks, to generate a return rate that is higher than the interest payments to customers.

There will be different credit grades of loans to lend, such as the following.

A bank can set the percentages of the total amount of new loans to be offered to each group of borrowers.

Borrowers with credit rating: Poor (C)
Market Loan interest: 8%
[ ] % of the total new loans to be offered to this group of borrowers.

Customers with credit rating: Average (BB)
Market Loan interest: 7%
[ ] % of the total new loans to be offered to this group of borrowers.

Customers with credit rating: Good (AA)
Market Loan interest: 6%
[ ] % of the total new loans to be offered to this group of borrowers.

For each group of borrowers, it will display the percentage for the total New Loans to make, and the total Outstanding Loans that have been made.

For example, for the riskiest group (borrowers with the lowest credit rating), the total outstanding loan may account for 20% of the total loan, but you may decide to make 30% of new loan for this group for higher interest returns.

The market loan interest rate will change when more banks are offering to this group of customers. The mechanics behind this is that: when a borrower receives competitive offers from various banks, the borrower will always choose the one with the lowest loan interest rate, and the market loan interest will drop to reflect that.

The interface may look like this:

Credit Rating Market Loan Interest New loan allocation % of existing loans
AA 6% 30% [+][-] 40%
BB 7% 35% [+][-] 30%
C 8% 35% [+][-] 30%


The list of the credit ratings for borrowers are:
AAA (very good)
A (good)
BB (average)
CCC (poor)
C (very poor)

The types of loan terms include:
Short term 1 year – the market loan rate less 0.5%
Short term 2 year – the market loan rate less 0.3%
Mid term 3 year – the market loan rate
Mid term 4 year – the market loan rate plus 0.5%
Long term 5 year – the market loan rate plus 1%

Each loan term accounts for 20% of the total loan.

This info is not displayed on the screen, it will be displayed when the player clicks on ‘?’ button and the game will display a window showing this.

For each loan customer group, it automatically assumes that there are 5 types of terms and the player does all 5 types of terms.

Gamplay
When the GDP is growing fast, there will be more companies wanting to take loans, therefore pushing the loan interest higher for the riskier borrower groups.

Competing banks, having a strong intention to get more customer deposits, will always aggressively open more branch offices and offer higher deposit interest rates.

To support the higher deposit interest rates that the banks offer to their customers, the banks must take on riskier loans. Eventually this will push most, if not all, banks to take on riskier loans, thus increasing the chance of loan defaults.

When the GDP expansion cycle getting close to its end, the GDP growth will inevitably slow down (not necessarily having a recession), loans from borrowers with poor credit ratings are likely to default as a result.

During an economy downturn, the default rate will only intensify if the banks have lent out loans too aggressively in the past.

chengtsai
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Location: Nevada

Re: Banking and Financial DLC design draft

#2 Post by chengtsai » Sat Nov 04, 2017 7:27 pm

It looks great. I am sure we will modify as we go along.
David, how do you give companies ratings based on what measure?
Thanks

beamthegreat
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Re: Banking and Financial DLC design draft

#3 Post by beamthegreat » Sat Nov 04, 2017 10:31 pm

Sounds great. Will there be the ability for corporations to issue or invest in bonds?

dark3214
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Joined: Tue Nov 24, 2015 9:53 pm

Re: Banking and Financial DLC design draft

#4 Post by dark3214 » Mon Nov 06, 2017 9:58 pm

Sounds great.I think it would be nice to have a relative currency in the Financial DLC(more exports to other cities strengths the currency) and have the ability to contol the key intrest rate and make decisions based on metrics such as (debt to gdp etc...)

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David
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Re: Banking and Financial DLC design draft

#5 Post by David » Mon Nov 13, 2017 4:20 am

chengtsai wrote:
Sat Nov 04, 2017 7:27 pm
It looks great. I am sure we will modify as we go along.
David, how do you give companies ratings based on what measure?
Thanks
It is going to be based on the following factors:
-the company's debt to equity ratio
-the company cash level, net of any debt, if it has any.
-if the company has a history of bond defaults, it will have a lasting effect on its credit rating. Though the effect will recede over time if the company manages to maintain solid financial health going forward.

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David
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Re: Banking and Financial DLC design draft

#6 Post by David » Mon Nov 13, 2017 4:21 am

beamthegreat wrote:
Sat Nov 04, 2017 10:31 pm
Sounds great. Will there be the ability for corporations to issue or invest in bonds?
Yes, this is in the plan.

jbvisual
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Location: Nijmegen, the Netherlands

Re: Banking and Financial DLC design draft

#7 Post by jbvisual » Mon Nov 13, 2017 12:51 pm

sounds great David!
I look forward to this DLC, instant buy for me :D

Malaras
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Re: Banking and Financial DLC design draft

#8 Post by Malaras » Sat Dec 02, 2017 6:07 pm

Awesome! Can't wait.

KCtrackhawk
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Re: Banking and Financial DLC design draft

#9 Post by KCtrackhawk » Tue Dec 12, 2017 1:50 pm

It would also be amazing if you could have the 4 investment option be city bonds, which you could choose which ones therefore gaining opertunity for adding that mayor can be picked by bank holding over 60% of a defaulted city bond. Or have the defaulted bonds not pay out therefore a loss, But if not this at least have it as an option but the income is tax free (just like real muni bonds)

also just as banks can invest in the fed, 5 investment option of fed rate (which since would be “no risk” could do half or 75-90% of market rate)

And if you could add investment offices, where you have analysts just like tech in r&d and the better skilled and paid the better the ETFs of the bank do. Which adds to stock market buying power as well

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