Bank Rush User Guide - How to manage a Bank?
Bank Rush is a business game for people who want to better understand the banking sector.
This very realistic banking game puts you in the role of the chairman of a major retail bank.
Bank Rush explains how banks are making money, and how the recent Federal Reserve policy is affecting the daily business of bank executives.
The financial crisis began in 2007 with a loss of confidence by investors in the value of securitized mortgages in the United States.
In September 2008, the crisis deepened! Stock markets worldwide crashed and entered a period of high volatility, and a considerable number of banks, mortgage lenders and insurance companies failed in the following months.
In February 2009 U.S. President Barack Obama signed the $787 billion American Recovery and Reinvestment Act into law.
The Federal Reserve announced that it will purchase $1.15 trillion in US Assets to prop up liquidity and lending to spur economic growth.
The Bank is operating in direct competition with 4 other banks. Your task, as the new
CEO is to intensify the competition an grow your bank in a sustainable way.
Your Bank operates in the retail sector and provides services for private individuals such as Current Accounts, Saving Acounts, Credit Cards and long term Loans & Mortgages.
You will adjust your interest rates for loans and deposits, set marketing budgets and expand your business!
Your compete against 4 virtual competitors that have different products and strategies. The US Accounts Bank and the UK Bank are the strongest competitors and try to outgrow each other. Two other competitors, the Global Trust bank and the Euro Bank Group are heavily hit by the financial crisis.
| ||Equity |
| 500 M$|
| ||Equity |
| 300 M$|
| 300 M$|
| ||Equity |
| 250 M$|
Credit Cards & Overdrafts are short-term credit lines for the customers short term cash needs. The banks charge the clients reasonably high interest on this. Generally, overdraft credits have the highest credit default and therefore interes rate charges are the highest of all of all products.
Loans & Mortgages are long-term borrowings. Personal Loans & Mortgages (home purchase) involve collateral, so they have a reduced risk weight of 60%. Long-term Corporate Loans have a higher default risk und can therefore be offered at slightly higher rates.
Current Accounts are held by clients to provide their short-term cash needs. For Current Accounts the banks pay only very small interest rates to their customers and they are a major source of funding to the bank. Associated with these accounts the bank charges fees for money transactions and related services.
Saving Accounts are used by clients who have surplus funds that they do not need immediate access to. For Saving Accounts the banks pay a reasonable interest to their customers. In periods where the Central Bank interest rate (Fed Rate) is greater than 2% long term deposits become are a good source of funding.
By operating checking accounts and long term deposits you get capital into the bank that you can lend out to other customers as loans.
In a way loans earn money while deposits cost money, but you need the deposits to have some money to be lend as loans.
It is essential that you try to lend out loans as expensive as possible (high interest rate) while refinancing the money as cheap as possible (low interest rate) to get the best result.
Whenever the Central Bank changes the interest rates (Fed Rate), the whole market moves with it. To help you making the right settings, you will get warning messages if your interest rates deviate strongly from the market's average. In any case you should frequently check your competitors rates and make sure your rates fit the market.
Your customers react very sensitive to changes in interest rates.
If you rise the Interest Rate for loans, existing customers will borrow less money and it will get more difficult to get new customers.
If you lower the Interest Rate for loans, existing customers will borrow more money and it will get more easy to get new customers.
If you rise the Interest Rate for deposits, existing customers will deposit more money and it will get more easy to get new customers.
If you lower the Interest Rate for deposits, existing customers will deposit less money and it will get more difficult to get new customers.
To grow your interest income you need to give out more loans to new and existing clients.
And for a high profitability you need to make sure that the workload of your managers reaches close to 100%.
To rise the workload you can get new customers by investing more into marketing. Once the workload is high, you can lower the marketing budgets to a sustainable level.
If you expand your current products or invest into a new one, the workload start low and you need to invest substantially into marketing to get enough new customers to bring up workload and profits.
The Treasury is the 'heart' of your Bank where the overall funding and cash allocations are made and the bank balance sheet gets shaped.
Core Capital Quota The Core capital quota (CCQ) shows the bank's equity in relation to the risk weighted assets. CCQ = Equity / Risk Assets
The Central Bank Credit lines with the Central bank are automatically taken and repaid as neccessary. However, your Core Capital ratio must be within the limits defined by the Central Bank. Initially the minimum Core Capital Quota required for Central Bank debt is 10% and it will be raised during the game. In case a bank's Core Capital Quota falls under this limit, the required funds are borrowed from other banks (Interbanking Market).
Interbanking Market If the Central Bank credits are limited, additional funds needed are automatically borrowed from other commercial banks for a reasonable rate. You should try to avoid this situation because the Central Bank is a less expensive source of funds. However, the Interbanking Credits insure that you don't run out of cash - unless your overall debt ratio get's too high (>95%) and the other banks stop lending money to you.
The Economy shows 4 important indicators on a monthly base, looking 12 month back.
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