Inputs needed: closing down a bank

[David]

Current design:
-A bank HQ cannot be closed down if it has bank branches. You must close down all bank branches first.

-A bank HQ cannot be closed down if it has outstanding client savings and the bank does not have enough capital to pay back all savings.

If the bank does have enough capital, there will be a button for paying back all deposits to customers and then close the bank.

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Firstly, we would like to seek your inputs about how the bank should handle the outstanding loans if the player wants to close the bank instantly.

The fact is that it will not be possible for the bank to instantly collect all the outstanding loans at its will.

If the player proceeds to close down bank, does it mean that the loans never have to be repaid?

How about adding a button [Suspend new loans & deposits]? This prepares the bank for closing down as it will suspend taking new deposits and loans. But it will take years for all existing loans to be repaid.

If the player still wants to instantly close down the bank, should it be allowed?

Any suggestions on how this should be handled?

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Secondly, if the bank does not have enough capital to pay back all savings, does it mean that the bank can never be closed down by player manually and the player just has to wait for its eventual bankruptcy?

Please let us know your thoughts about how this should be handled.

[CFA]

The central bank system should be added to take over the bankruptcy bank because of the banking law.

[David]

The central bank system should be added to take over the bankruptcy bank because of the banking law.

My understanding is that commercial banks are allowed to go bankrupt in most countries.

[megapolis]

The central bank system should be added to take over the bankruptcy bank because of the banking law.

My understanding is that commercial banks are allowed to go bankrupt in most countries.

In Russia it is a general practice that Central Bank decides that certain bank does not meet CB quality standards and takes it under external governance. They call this process "Sanation". As far as I understand, during sanation they transfer assets to a different bank, add some funds from gorvernmental Deposit Insurance Agency and subsequently bankrupt the bank.

If we drop the fact that the process of choosing the targets for this sanation could be arbitrary, the process itself looks quite reasonable.

[standardplayer]

What if you created a government sponsored enterprise that banks could buy and sell loans from?

In the US it is common for banks to sell mortgages to Freddie or Fannie so that they can be repackaged as mortgage backed securities so that they can provide liquidity to banking market.

Also could we have the ability for banks to sell branches to other banks for a slight premium over deposits say 2.5%-5% premium?

Banks sell branches and their corresponding deposits all the time so they can reduce their deposit liabilities relative to their capital or restructure their footprint.

In a Bank Bankruptcy the Federal Deposit Insurance Corporation (FDIC) is appointed the as the receiver and it usually does one of two things.
-Purchase and Assumption Agreement (P&A), in which deposits (liabilities) are assumed by an open bank, which also purchases some or all of the failed bank's loans (assets).
-Deposit Payoff, as soon as the appropriate chartering authority closes the bank or thrift, the FDIC is appointed receiver. The FDIC as insurer pays all of the failed institution's depositors with insured funds the full amount of their insured deposits.

FDIC https://en.wikipedia.org/wiki/Federal_D ... vent_banks

[David]

Thanks for your inputs. I will forward them to the dev team.

[buells]

I think it should be simpler than that. Outstanding loans should definitely still need to be repaid to a "generic bank" or receiver. The player should recover the capital. If there isn't enough capital, shouldn't the bank already be bankrupt at that point? If there is $8mm of equity in a bank with $100mm in assets, the player should just recover the capital. Depositors or liability funding should get the rest. The complicated part I guess is that bank capital isn't just cash lying around on the balance sheet or loans/securities in excess of funding. It also includes the value of the bank property. If you have to liquidate the property at a discount, that reduces capital and what the player recovers. I think it basically looks like the bankruptcy liquidation option screen.

[Ginn7]

I was actually in the process of trying to wind down my banking operations. I want to transition to a different business. The problem is that it is near impossible unless you can come up up with billions to pay back customer deposits, which could take decades. Especially, when you cannot suspend deposits and loans, therefore, a button to suspend both would be very useful. Right now I have closed down all my branches, kept the land, and have only an HQ. My bank is making a profit but I can't close the HQ. I suppose I can keep it running while I invest in another business model. At this point, I simply want to get rid of it and move on.

A suspend button is a great idea, and/or maybe a way to sell your loans on the to other banks at a discount?

[vperdiguez]

Try this one...

suspend.png (121.42 KiB) Viewed 2668 times

[Ginn7]

Thanks so much!

Just what I wanted!