Poll: Economy's Impact on Loan Defaults

[David]

Do you think the Economy's Impact on Loan Defaults setting should be changed from a list of options to a slider?

[avengerbg]

here is my vision on this specific instance, Moderate should be as close to real world as possible, im not expert but i just read default rates is like 3-4%, if we get this as base, The low setting should half this, and very low, be one 3th or quarter, of the moderate. On the other side, on high default rates should double, and on very high triple or quadrupled. Im unaware of the game mechanics and formulas for this specific area, also default rates should be extended over specific period of time, a year. so if you have 100 mil lended, and default rate is 16%, that will be total of 16 mil defaults over 1 year (becouse GDP is recalulated on yearly basis), thats simpliest that comes in mind. The more complext aproch as i see it will involve "predicting" the loan movments for a year, and recalculate it each time there is chage in bank capital, becouse of capital injections, new deposits or withdraws etc, and base default rates on this prediction.

Also i think i can be interesting idea to link somehow the default rates to the GDP difference, for example for every 1% GDP goes in negative, the default rates can increase with 4%, so at 25% shrink in GDP, default rates will double, on 50% shrink they will triple and so on. Since even 1$ less in GPD from the year before will trow economics in recession, but negative impact of this reccesion will be softened since difference isnt so big. Same can be aplied in demand for goods. if all of this isnt done already ofcouse On the other side, boom cycles can influence banking and all other aspects in the same way, the bigger is growth of GDP, the bigger is increase of demand for goods and loans.