Feedback needed : Raising deposit cap

Banking and Finance DLC for Capitalism Lab
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Should we be given full flexibility on what we want to set the deposit cap at?

Raise deposit cap (to 100%) + add in early withdraw penalty (i.e. 5% of principal)
4
57%
Raise deposit cap (to 100%)
0
No votes
No change
3
43%
 
Total votes: 7

JasonLJJ
Level 3 user
Posts: 75
Joined: Sat Dec 22, 2012 3:24 pm

Feedback needed : Raising deposit cap

Post by JasonLJJ »

Hello fellow CapLabers!

At the suggestion of David, I would like to poll everyone here on a suggestion I have about the deposit cap

Situation
Game currently has hard deposit cap limiting amount of deposits a firm/player can put into the bank. At most, the player's firm can only deposit up to 50% of the customer deposits already in the bank into the bank

Why is this an issue?
Early game - Hard to quickly upscale start up bank
Mid / late game - Large amount of surplus cash sitting with player, subsidiary and holding company. No obvious avenues to preserve capital while generating small return.
Insurance update - Insurance companies (to be released) should be allowed to deposit money in the bank as well

Proposal
Increase deposit cap slider to 100% - allow users to have flexibility
Put small penalty fee on early withdrawals (5% of principal amount + forfeited interest income depending on the duration) to counter the risk of some users exploiting this by depositing large sums into competitors banks and then withdrawing it quickly, thereby bankrupting competitor bank

Pros
+ Flexibility to different play styles; for those who want to run a financial conglomerate, they can raise the deposit cap to 100%, while for players who want banks to play a supplementary role, deposit cap can be set at 20% at their own will
+ Allows rapid upscale of bank, especially when the player's bank is not the first in the market and
+ Better use of idle cash sitting with subsidiaries
+ End-game content
+ Potentially allow for cities to invest surplus capital in a risk-free avenue

Cons
- Could be exploited by some players to bankrupt AI competitor banks. However, this is a matter of "willingness to cheat" not "capability to cheat" - even if deposit cap was 20%, players who wanted to use the same trick to cause a liquidity crisis with AI firms could still do so.

Would love your thoughts on this!
Last edited by JasonLJJ on Fri Nov 22, 2019 10:39 pm, edited 2 times in total.
standardplayer
Content Contributor
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Posts: 166
Joined: Sun May 12, 2019 1:50 am

Re: Raising deposit cap

Post by standardplayer »

I don't think that a single individual or corporation should be able to deposit a substantial percentage of total deposits into a bank. There is too much room for exploitation and it would not be very economically accurate.

I know you would like places to put excess cash but that is part of economics the "big money problem" like Warren Buffet currently has $100+ Billion in cash and equivalents because he can't currently find any investments of sufficient size to purchase in the current market.

I have mentioned it before but, I believe that there should be an alternative place to put cash:
*Short Term: Money market and/or Treasury Bills. Mature in (1-12 Months)
*Long Term: National Government Bonds Mature in (5, 10, etc. Years)
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JasonLJJ
Level 3 user
Posts: 75
Joined: Sat Dec 22, 2012 3:24 pm

Re: Raising deposit cap

Post by JasonLJJ »

While I think there is room for exploitation, in the end this comes down to the desire of the player for fair game - nothing can stop a cheater from cheating. I believe that the large contribution of a single depositor is something that would only exist during the earliest stages / late stage of the game when you're either trying to scale your bank or have too much surplus capital on your hand and want to look for a safe place to invest it. In the end, what I am asking for is optionality - the option for me to have it at 100% or 50% or 20% or even 5%.

You could even put a limitation where the 100% cap only applies to your own banks while keep it the way it is for normal banks it is right now

I like the idea of treasury bonds too.
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