Feedback needed: Is the profitability of banks adequate?

[Freemarket]

It seems that the level of defaults for companies "A" is a little too high.

[David]

You may change the Banking setting “Economy's Impact on Loan Defaults” to reduce the default rate. You can access it on the Bank page of New Game Settings menu.

[JasonLJJ]

David - it still says 6.105

[David]

Jason, please try this link: https://caplab.b-cdn.net/CapLab_Post_Re ... _v6106.exe

[Freemarket]

loans and interest with negative balance

[JasonLJJ]

David, I've rerun the analysis using 6.106- 100% AAA still out profits 100% CCC more than 2:1.

Dominant strategy is still to invest all in AAA...

I think the appropriate interest rate for CCC, given the default rates, should be in the mid 30s to high 40s. I think you may want to tell them to consider reducing the default rate too for CCC grade loans. Should be max 10%.

Also, I've noticed that a couple more people voted in favor of 1) Allowing cities to deposit cash into the bank; 2) Raising the deposit cap to 100% with a penalty for early withdrawal. Can you please raise this with the dev team?

[JasonLJJ]

By the way, I think the overall direction of the banking part of this DLC is going great - please communicate my appreciation for what the dev team has done and keep up the good work!

Many thanks to you David for playing the advocate on behalf of the player base!

[David]

Hi Jason,

I would recommend that you change the Banking setting “Economy's Impact on Loan Defaults” to Low or even Very Low and the default rate for high-risk loans will go down. I tested it myself and this setting did make a noticeable difference in the current version.

Another note is that I suppose banks taking an all-in approach towards high-risk loans are not expected to do well in the long run, as manifested by the fact that none of the publicly traded banks would even contemplate having such a toxic portfolio of loans. I usually tested with a riskier but still reasonable mix of loans like 30% CCC and 35% C.

Having said that, going all in with 100% C is not without some merit. During an economic boom, one bank I tested with 100% C massively outperformed all other AI banks. But it did require one to act swiftly to reduce the exposure to toxic loans once the economic expansion started to show signs of waning. So it is tricky balance act to pull off. Most of the time I would just be happy to settle for a more balanced loan portfolio. I think all these bear some resemblance to the real world and is quite logical.

And thank you for your kind words and continued support! I will forward your kind note to the dev team.

[JasonLJJ]

Hi David

The above scenario was run with very low impact on defaults...

[LT3001]

In my experience playing the game, the profitability of banks is pretty much perfect as is. You can make 20%+ RoE in good times; single digit in bad times. Through the cycle in the teens. That's about where is should be so well done on that.