Banking & Finance

The financial system from ANNO1777 tries to be similar to a real-world financial system. Its purpose is to facilitate the movement of money. In other words it creates the means by which those who need money and those who have excess of money to meet on a common market. The financial system is composed of four different markets. Currency Market (FOREX), banking offers market, stock market and government obligations market. The participants in the financial system are citizens, banks and government. In this chapter we will examine each issue separately.

Money Market

In this game there are three types of coins. First there is the EURO, the currency which can be exchanged into REAL EUROS at a rate of 1:1, gold and the country\’s national currencies. There are also two markets: EURO / gold that can be bought / sold, EUROS in exchange for gold and gold / local currency, for each particular country. On this market can be sold / bought gold coins in exchange for local currencies. Any player can buy or sell any currency at any time without restriction. You can access the money market by going to the section Financial Market (main menu).

Exchange rate

In a normal market, in order to buy a currency, someone must sell it first. In ANNO1777 the market works automatically and the currency adjusts after each transaction. Here are some examples in order to better understand this mechanism. Suppose that on the EURO / gold market, the exchange rate is 9.5110, i.e. 1 EURO = 9.5110 GOLD. Suppose you sell 5 Euros. The sale is made on the spot, but the amount received will not be 47.5550 GOLD. After each sold Euro, the exchange rate automatically falls with 0.0009. The drop rate is obtained by multiplying 0.0001 by the current rate that is 9.5110. So even if you sell 5 EURO in group, the system will make the following calculations:

The first EURO is sold for 9.5110 GOLD, after than the exchange rate drops to 9.5101
The second EURO is sold for 9.5101 GOLD, after that the exchange rate 9.5092
The third EURO is sold for 9.5092 GOLD, after that the exchange rate drops to 9.5083
The fourth EURO is sold for 9.5083 GOLD, after that the exchange rate drops to 9.5074
The last EURO is sold for 9.5074 GOLD, after that the exchange rate drops to 9.5065

Basically you will receive in return an amount of 9.5110 +9.5101 +9.5092 +9.5083 +9.5074 = 47.5460 gold and new exchange rate will be 9.5065 gold for one EURO. This system also applies when buying EUROS and of course in the case of transactions between gold and national currencies.

Currency exchange commissions

After each currency exchange commissions will be paid. For the EURO/ gold market, the fee is basically the amount by which the commission has increased / decreased following the transaction. In the example above, the market has decreased by 0.0045 which is exactly the commission that will be paid. The commission is paid in the currency bought, in our case GOLD. The situation differs in the case of exchange with countries\’ currencies. Here there is a percentage fee which can vary between 0.01% and 5% applied to each transaction. Money from this fee shall be paid to the budget of the respective country and the fee is set by each particular government.

The currency conversion

To sell or buy EUROS, go to the \’Financial Market\’ section from the main menu. To make exchanges with other countries\’ currencies, go to the same page, at section gold / CURRENCY and select the corresponding country. After completing the sum, the press the button Sell / Buy.

Banks

For any market economy, banks are a key element. The role of banks is to take over the excess of capital from those who hold it in order to place it to those who need it. For the services offered, the banks from the real world collect fees and interest. Exactly the same thing happens in ANNO1777. Anyone can open a bank in order to raise money to give to those who need it.

How the Banks work inside ?

First, please note that there is a clear distinction between own funds of banks and the depositors\’ money. Also, all loans are guaranteed by the government. If depositors are unable to pay, the state budget will cover the losses. A virtual bank is a type of company like any other. It needs means of production and workforce to manufacture products, and based on the products, they offer services.

Banks attract money through deposits and current accounts for which they offer interest, and place that money to those who need it, through loans. Banks also allow money transfers between current accounts. Generally the interest rate offered by banks is lower as compared to the required interest. Profit comes from the difference between the interest offered / required and the taxes on transfers / withdraws / deposits of money.

Means of production and banking products

A bank uses paper as raw material. Based on the paper, it produces deposit certificates, current account certificates, credit certificates and transfer forms. Each product category is used to provide a specific type of service. Without these items on stock, the bankcannot provide a specific type of service.

Deposit certificates – For each deposit opened at a bank, a deposit certificate is consumed. Without deposit certificates on stock, banks cannot offer deposits

Current account certificates – for each account opened at a bank, a current account certificate is consumed. Without current account certificates on stock, the banks cannot open current accounts.

Credit Certificates – For each credit provided by the bank, a credit certificate is consumed. Without credit certificates on stock, banks cannot offer loans.

Transfer Certificates – for each bank transfer, a transfer certificate is consumed. Without transfer certificates on stock, banks cannot make transfers.

These certificates are made based on the means of production and on the workforce employed by the bank.

Loan Fund

In a bank, the depositors\’ money coming from current accounts and deposits are kept in a special fund called the Loan Fund. The bank manager DOES NOT have access to this fund so he cannot withdraw money from the fund unless he previously invested in it his own money of the bank. From this fund, money can be taken for payment of cash withdrawals or loans. Also in this fund are paid all the money from deposits and current accounts opened at the bank. The interests owed by the bank are paid from the company accounts. Also the interests and taxes are charged by the bank are also paid into the company accounts.

Insolvency

Every day, banks pay interest for deposits and opened current accounts. Every day, interest is charged from those who have bank loans. Both interest earned and interest due are paid in the bank\’s own accounts. If a bank runs out of money for interest payments, then all affected accounts will be closed, be it deposits or current accounts. Depositors\’ money is refunded from the bank\’s lending fund whether the fund has money or not.

If a player does not have money to pay daily interest, the money will automatically be withdrawn and the player will no have anything in his account. If the person who contracted the loan refuses to play anymore, and the account is closed for inactivity, the state budget will bear the negative balance. This is the reason why we said earlier that all loans are guaranteed by the government.

Loans

Anyone can contact a credit if he worked at least five days. .

The maximum credit that can be contracted is calculated using the formula Credit = Revenue * Indicator, where Credit = maximum credit that can be contracted, Revenue = revenue from WORK performed during the last N days, where N is the number of days by which the credit will be contracted, Indicator = maximum degree of indebtedness established by the government. The maximum degree of indebtedness represents a fixed percentage established by each individual government. It can vary between 10% and 1000%.

Here is an example. In the last 10 days, player A had an income from work of 400 RON. The Indebtedness degree established by the government is 300%. The player will be able to access a loan of 1,200 RON for the next 10 days. There is also a governmental indicator which indicates the maximum credit that can be taken. Suppose the maximum threshold is 1,000 RON. In the above example, the player may only take 1000 RON.

To contact a bank loan, go to page bank and review the offer.

Any bank can set an interest rate and the period for which the loan is granted. Banks can set up maximum five types of loans. You can contact only the maximum loan allowed. Intermediate values are not accepted. After contracting, the interest will be deducted automatically from the bank every day. Even if you have money in the account, the bank will automatically withdraw money. On due date, the bank will automatically withdraw the value of the loan.

When contracting the loan, money is taken from the bank\’s lending fund. But interest payment is made on the bank\’s own accounts. The lending fund also collects the money returned at the end.

Current Accounts

Bank accounts are bank instruments through which you can have immediate access to money. You can open a current account from the bank\’s presentation page. After opening a current account at a bank from the game, you can immediately start depositing, withdrawing or transferring money. Note that each type of operation is charged by the bank. You can see a list of bank accounts owned on page Accounting / Financial Assets / Accounts & Loans. Also on this page you can submit / withdraw / liquidate or transfer money. Click the button Extract and you will have access to the list of transactions made with that account.

Deposits

Unlike current accounts, bank deposits have a pre-established validity period. During this period you have NO access to money from the deposit. The money will be automatically refunded with interest at the due date. You can open a deposit directly from the bank presentation page. After opening, you can see information regarding the deposit on page Accounting / Financial Assets / Accounts & Deposits. The interest is paid by the bank daily directly into the deposit account.

Remittances

You can send money from a current account in any other account opened in the same currency. You CANNOT transfer the money of owners or slaves. Also you cannot transfer money if you have a contracted loan. To transfer money go to page Financial Assets / Accounts & Loans, choose the account from which you want to make the transfer, click the Transfer button and fill out all information carefully. Transfers are made immediately.

Fees and commissions

Banks can establish their own fees and commissions. It is advisable to carefully check these fees before contracting loans or making bank transfers. The bank offers and collects interest for current accounts and deposits. The bankcollects fees for the following transactions:

Cash deposits in current accounts.
Withdraws from current accounts
Transfer of money from one bank account to another

A share represents the ownership right over a part of a company. A newly founded company in the game has 1000 shares. Of these 1000, only 900 are held by the establisher. Since all companies from ANNO1777 are public, the remaining 100 are automatically sold by the state budget to other players. In other words no one can hold more than 900 (90%) of shares in a company.

Shares bring dividends and can also be traded on a free market. Every time a company owner withdraws money from the company, the money will be distributed to all shareholders of the company, depending on the number of shares held. Let\’s say A, who owns company B, withdraws 100 gold from the company. Suppose there are two shareholders in company B. The first is the owner with 900 shares and you are second one, with 100 shares. You will automatically receive 10 gold from the 100 withdrawn.

Shares may be sold and purchased. You can see the list of shares that you own on page Accounting / Financial Assets / Shares & Bonds. Also on this page you can set the selling price of a share. The stock market is available at section Financial Market / Shares. On this page you can see a list of all the shares offered for sale. Note that the stock market is global, so you can also see the shares put on sale by players from other countries.

Bonds

Bonds are financial titles issued by governments to cover deficits. Practically, these are loans contacted by the state budget loans from the population. There are two types of bonds. Those issued in local currency and those in GOLD. The first ones can be bought only by the citizens of the country in which they were issued. The ones in gold can be purchased by anyone. After acquisition, the bonds can be traded on a free market. A government may issue a finite number of bonds based on the number of citizens, the equivalent of 1 gold /stronghold and 10 Local Currency / citizen. If, for example, country X has 5,000 citizens, it means that it can issue bonds worth 5000 gold and 50.000 Local Currency.

Bonds have nominal value, interest and life duration. The value of a share is automatically set to 1 and cannot be changed. Life duration is also set automatically to 100 days and also cannot be changed. Interest is variable and determined by the government. Interest refers to interest paid daily by the budget. For example, if a country\’s government issued bonds worth 1,000 gold at an interest rate of 1%, this means that it has issued 1000 bonds, each with a nominal value of 1 gold. For these bonds, the government will pay to every owner, every day, an interest rate of 0.001 gold / owned bond. If you buy 10 bonds of this issue, you will get 0.1 gold daily. On due date, the issuer of the bonds pays the nominal value to the owner, in this case 1 gold / bond.

All interest brought by the obligation, as well as the final payment on due date are guaranteed by the system. That means you get money even if the state budget DOES NOT have those money. Basically, the budget may come down because of that. Bond market is available on Financial Market / Bonds.