PC-run banks must be run by a person with appropriate knowledge and math skills to handle such a system. While we will help you to understand the formulas on this page, it still comes down to that. Java calculators will be provided at some point, but are not a substitute for understanding the process.
Starting Income:
Banks generate a 10% annual interest rate on all monetary holdings. This interest is compounded continuously and should be updated on any account holdings or financial information pages monthly. Worksheets will be provided shortly to help in facilitating any questions.
Starting Treasury:
A bank starts with 170,000 credits. These are not the bank's own credits, per se, but the total value of various and anonymous NPC accounts.
Starting Ships and Vehicles:
None for the bank. Within reason, the PC owner of the bank may start with an unmodified personal ship or vehicle.
Starting Facilities:
A bank begins with a corporate headquarters. Its location requires permission from a PC Leader (OOC, since you're not approved yet) for tactical planets (SWE, SWI, or SWNR) or Senior GM approval for non-tactical planets. The Branch GM can ask the Senior GM about the particular worlds you are interested in.
Banks are a method of anonymously moving capital to places in the economy where it is needed. (For example, the wealthy spend their money on things or to do things, which creates jobs, or they don't spend it — and thus keep it in a bank — and an entrepreneur or business takes that money out as a loan, and creates jobs somewhere else.) Funds are brought into a bank through deposits in accounts and interest on loans, and money is taken out through loans and withdrawals. The bank hopes to receive a greater amount of money through interest on loans than it loses through withdrawls from accounts, so that it can increase its own holdings and stature.
There are two ways of calculating interest. Simple interest works well when non-bank groups give loans to each other. A mathematical formula may be used for these loans, but, in essence, loans between non-bank groups are contracts and may use whatever terms of payment the parties involved agree upon — sometimes they do not even deal with interest in the proper sense. The other is compounded interest. It is more complex, but it is necessary for banks, because it puts their money to work for them.
One of the problems for banks in SWC, and for giving loans to characters or groups in general, is the length of time it takes to get a return. Sometimes a debtor even leaves the club before he has paid back the credits. In addition, a character or group may place a large sum of credits into a bank account, which generates interest regardless of outside activity. Banks need to have a source of income independent from direct PC loans if they are to cover the accounts people hold and also net a profit themselves. So this is the solution we came up with:
A bank's income will be described as interest on its total monetary holdings, spontaneously generated through interactions with anonymous NPCs. For example, a starting bank, with a treasury of 170,000 credits and a yearly interest rate of 5%, will have 178,716.1 credits at the end of its first year. Another example is of a PC account which contains 31,000 credits and has a continually compounded, annual percentage rate of 1.85%. After one year, the bank would have received its 5% rate as a straight income of 1,589.4, with 578.8 of those credits being added to the PC's account.
It may seem like the bank has benefitted at the expense of the PC. However, this is where the free market steps in. Banks will compete for customers because having more accounts and more credits allows them to generate more income. PCs will have opportunities for better-paying accounts, balanced by the need of the banks to still make a large enough profit for themselves. Banks are free to determine what rate of interest they think is fair, taking into account their competition and their own income level. They may also determine the time period and method of determining interest which they offer their customers.
Definitions:
| Simple Interest: A = P * r * t
| Simple interest applies the interest rate only to the principal. For example, the accumulation on 1,000 credits at a 10% interest rate per year (r = 0.05) is 1,100 credits the first year, 1,200 credits the second, 1,300 credits the third, etc. Due to its ease, this makes it recommended for loans in SWC — there's less for the regular player to worry about. Determine how much you want to make on the loan, and simply divide the total by the number of payments you want it in. Compounded Interest: A = P (1 + r/n)nt
| Compounded interest is what happens when the principal itself is increased by the interest; you get "interest on your interest." At regular intervals, the accumulated value becomes the new principal against which the same interest rate is applied. 1,000 credits at a 10% interest rate per year, compounded monthly, gives you 1,008.3 the first month, 1.016.7 the second month, and 1,104.7 at the end of the year. It is useful for accounts people have at banks in SWC. Continuously Compounded Interest: A = Pert
| Continuously compounded interest is what happens if you compound interest across infinitely small time periods. In our case, these infinitely small periods will be expressed in fractions of a year. 1,000 credits at a 10% interest rate, compounded continuously, gives you 1,000.3 credits at the end of the first day, 1,008.4 at the end of the first month, and 1,105.2 at the end of the first year. This is what we will use to calculate bank income in SWC. |
However, when it comes to each PC's account, interest may be viewed as a payment or "credit" given by the bank. Banks may calculate this interest any way they want. Interest is typically agreed upon with the customer when the account is opened or changed through negotiations (opened by either side) later on. However, this is Star Wars; the galaxy is fractured, there is no definite rule of law or jurisdiction, and little final accountability. A bank has control of the money in its vaults, and if it wants to screw someone over, the GMs are not going to stop it. However, such an act is very bad for business, and will certainly affect the bank's income rate. And when PCs get jerked around, they usually find some way to respond.
Credits
The Imperial Credit, when issued as chits (the equivalent of coins), goes down in denomination to .1 credits. Therefore we will have the decimal place go down to one-tenth of a credit for the purposes of banking in SWI. Income and interest for capital-scale and character-scale credits are determined independently. A bank will have the same income rate for both credit scales. It is better, however, for PCs to establish separate accounts for character- and capital-scale savings.
Time Scales
In SWC, there are two time scales. Game time is used for adventuring and tactical combat. Real time is used for construction, training, and R&D, but is overridden by game time when there's a battle. Interest and income will be compiled in real time. Banks can come up with whatever rates and periods they want, but monthly is highly recommended. Remember that we construct mile-long starships here in one month of real time. We will use the real world calendar as well, rather than the 368-day Star Wars calendar, with its 10 months, 3 festival weeks, and 3 holidays. That calendar would confuse the banks' ability to offer monthly interest rates rather than yearly, daily, or continuous ones.
Loan Balance
Situation: A person initially borrows an amount A and in return agrees to make n repayments per year, each of an amount P. While the person is repaying the loan, interest is accumulating at an annual percentage rate of r, and this interest is compounded n times a year (along with each payment). Therefore, the person must continue paying these installments of amount P until the original amount and any accumulated interest is repayed. This equation gives the amount B that the person still needs to repay after t years.
B = A (1 + r/n)nt - P (1 + r/n)nt - 1
(1 + r/n) - 1where
B = balance after t years
A = amount borrowed
n = number of payments per year
P = amount paid per payment
r = annual percentage rate (APR)
It's possible that SWI groups could be required sometime to put their free funds in banks, but I'm not sure how feasible that is yet.