Thanks to the new '[a url=http://www.erepublik.com/tops-newspaper-0-general.html]Top Erepublik[/a]' stats I think I can safely say that The Reformer's Chronicle is Erepublik's number 1 international newspaper! Hopefully if I can write some more useful articles I'll be able to carry on and be the number 1 paper outright!
After having many requests about how I to run a bank I thought it was about time I actually write up a proper article on it.
In Mid-December I set up what (as far as I am aware) were Erepublik's first national and commercial banks. The [a url=http://www.erepublik.com/profile-6636.html]Bank of England[/a] and [a url=http://www.erepublik.com/profile-7749.html]1st Commercial Bank[/a]
The Bank of England (BoE) is run by the government to provide funds to other government departments and to provide loans to commercial banks. It does not lend money to citizens. Money is transferred to the BoE from the National Account by the President (me!). The BoE is now run by the UK Finance Minister [a url=http://www.erepublik.com/profile-12584.html]Hatsu[/a]. I'll write more about the UK government in another article.
1st Commmercial (1Com) is a private bank run by me to lend and borrow money with the aim of making a small profit (fair given the risks in lending money!).
Here I am going to set out the way I run 1Com in order for others to learn from my experience (and mistakes) as a bank manager. My hope is that eventually banks will become an in-game feature so we are also trying to beta test a workeable model for hard-coding. The admins have told me that they want to introduce banks but it won't be until after the war module is in and working. So we will probably need to run these systems for another couple of months.
First though, some rules that all Simulated Organisations (SOs) must follow:
1) You can only buy food (Q1 is all you'll need) - [unless the specific purpose of the org is to buy gifts]
2) You cannot join the army
3) You cannot join a political party
4) You cannot vote
5) You cannot have a job
6) You cannot own a company (unless through repossesion which I'll come to)
7) The citizen who runs the SO should be named in the SO description
BORROWING AND LENDING
As the bank manager you need to set your borrowing and lending rates. Ideally the lending rate should be higher than the borrowing rate if you want to make a profit!
My recommendation is also to make the interest rate a non-compund weekly rate. Payments should be 'repayment only'.
Compound interest would mean you can pay later but you have to pay interest on the interest. So you pay off the loan over a period of time but you have to pay more (ie. if you take out 100 Gold, week 1 it goes to 102G, week 2 to 104.04, week 3 106.1208 etc). In short, compound interest is very messy and a pain to have to work out. So I prefer to go for simple interest.
Repayment-only means that the borrower is only obliged to make a weekly payment against the INTEREST on the loan not the actual loan itself. Repayments can be made against the actual loan as and when the borrower can afford it. Obviously there is an incentive to pay off as soon as you can so you have less interest to pay. The lender (ie. the Bank) can decide if they want to set a maxiumum period within which the loan must be repaid.
This makes it very easy to calculate a repayment schedule and for both the borrower and the lender to know what is owed and when it has to be paid.
1Com's weekly rates are 1% for savers and 2% for borrowers. If I borrow from the BoE the rate is 1%. I'm borrowing less from the BoE now as I have more private citizens saving their money in the bank, but the National Bank was useful to get going. You can see the transaction history [a url=http://www.erepublik.com/forum-topic-7471.html]here[/a]
PENALTIES AND SECURITIES
If someone misses a payment they receive a fine of 10 GBP which gets added onto the total loan amount.
4 missed payments (I used to say in a row, but I'm going to just say 4 in total from now on) and the bank can then take action to REPOSSESS the business.
This comes onto a crucial point. I only lend money for the purpose of starting or improving (upgrades/exporting) a business. Every business has an intrinsic value so this is the only way I can guarantee to get my money back if things go wrong.
This is where the CONTRACTS THREAD comes into place.
You can see a typical contract thread [a url=http://www.erepublik.com/forum-topic-7941.html]here[/a]
The admins WILL enforce a contract if the terms of a loan have been breached.
I've had 3 loans go wrong in the past. One was with Lord Jonsson who ran [a url=http://www.erepublik.com/company-2938.html]Iceland Health[/a]. He wanted to stop playing but had the courtesy to transfer ownership of Iceland Health to 1Com. 1Com was able to resell the company to the government (for use as a kind of small-scale training hospital).
Another was with [a url=http://www.erepublik.com/company-4473.html]CJ Gifts[/a] who tried to sell his company to a friend. Thankfully the friend cooperated and gave the money back to the bank. CJ Gifts was then sold to someone who actually cheated to get the Gold and then got banned.
But the really interesting one is [a url=http://www.erepublik.com/company-2364.html]Home and Hearth[/a]. The [a url=http://www.erepublik.com/forum-topic-1205.html]CONTRACT[/a] for H&H stipulated that payments had to be made every week. But Zhaa Ziyang (the owner) disappeared without a trace. So, as 1Com, I posted updates on the missed payment and after the 4th missed payment I contacted the admins. They agreed that the terms of the contract had been breached and ownership of the company was transferred to 1Com where is it being run until a buyer comes forward.
So there we go, that's part 1 of how to run a bank. These basics should be all you need to run your own bank.
In Part 2 I will cover issues such as how to decide who to lend to, complications in securing the loan, how the creation and running of banks should be moderated, international banking, and my proposal for the creation of an Erepublik Banking Federation.