Banking and Financial DLC design draft
Posted: 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.
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.