Saving the National Neopian Bank: Part Three
"Now, I have analyzed the bank's problems over the years," Mr. Roberts said. "And as mentioned before, we face the possibility of a financial apocalypse should this fail. Now, we obviously cannot purchase new depositor's insurance, as the premiums would be too high, not to mention that no one would want to insure us given out current condition. So instead, we have to cut off our problems in other places. For that, I believe that Colby has prepared a report."
Mr. Roberts didn't want to shift all the weight to Colby, but anyway, he had read Colby's plan over and over several times, and he had to admit that it made the most sense to him.
Colby didn't seem affected in the slightest and began reading out his report. "There is no silver bullet that can solve all of our problems, because there isn't just one problem. There are several troubles currently plaguing the National Neopian Bank. However, so long as the major ones that I have listed out are taken care of, the bank can resume making profits as usual."
"The first item on our list has to deal with the classic Neohomes downturn. As a brief summary, I suspect that all of you must remember the earlier housing boom in which classic Neohomes were erected all around Neopia. The bank began building them as investments to sell later or rent out," Colby said.
"Wait, if people can just pay for homes themselves, why would they buy some?" Golgoth asked.
"Mainly due to time. Even if they had the neopoints on hand, a buyer would have to wait several weeks, sometimes months, before a home would be ready to live in. We initially were able to profit substantially from this by building pre-made homes, but then profits really began to come in when there was a shortage of space to build on. We built, according to records, approximately two hundred million classic Neohomes in total. The problem is that of course, we hadn't anticipated the emergence of Neohomes version 2.0, and that also that these new ones would be free to make. Needless to say, prices have plummeted, and many of them are now barren and useless. Their upkeep and maintenance also cost the bank quite an amount. Based on our data, we should sell all of those that haven't been used for the last three years. We estimate that together with the land and the reduction in expenses, we can save approximately fifty-two billion neopoints," Colby finished,
"We're already starting on that," Mr. Roberts said. "The only problem with that is that we'll have to fire a few workers, but that's better than firing all of them when the company collapses."
"We then have a very large problem with our workers. Due to budget cuts, we have been forced to cut back on machinery and now we're quite literally giving neopoints away through these new 'random events' or rather due to our own bank errors, and also eroding public belief in our system. No one appears to have taken them very seriously, but that could change. What we need is an increase in staff in this sector, and an increased number of accountants. Some people have suggested moving towards more computerized work using various Virtupets-based programs, but there are far too many complications with this idea, and especially since Virtupets is yet to completely free itself from Sloth's clutches. We can only imagine how disastrous it would be if Sloth somehow managed to get his hands on the workings of the National Neopia," Colby said.
There were nods from all across the room.
"But wouldn't that end up costing more, because you're hiring people?" Mrs. Beth asked.
"We've run the numbers, and the amount we'll save from not having to hand out the neopoints far outweighs the cost. Not only that, it also gives us an opportunity to transfer the people who are going to be fired to new positions, thereby keeping our employees happy," Colby said.
"So why aren't we doing all of this if it sounds so perfect?" Golgoth asked.
"Simply because not all of it is perfect, there are still other parts of the plan," Mr. Richards said. "Also, we wanted to make sure that no one would have any problems here. All of us are stakeholders in this to an extent. The shopkeepers need the bank for loans, LDSC is our business partner, the Mayor needs to insure we stay afloat otherwise almost all of Neopia Central will collapse, and of course there are our shareholders. We want to make sure that you all can agree to these conditions."
No one objected.
"Moving on," Colby said as if he was following some script, "an additional problem, as mentioned by the Mayor before, inflation has affected all of us. Knowing this, the maximum bank account minimums are not that effective anymore. To remedy this, we are proposing doubling the required amount for each of the various levels. This will also help us keep more neopoints as deposits with us, and allow us to pay out less in interest. Ten million might have been enough for Ultimate Riches! in the old days, but that doesn't really count as that much now. So, the bar for Ultimate Riches! would be raised to twenty million neopoints." Colby paused then as he could see that several people had objections to this plan.
"Wait a minute, so this would impact everyone?" Golgoth asked.
"No," Colby said. "We're only planning on doing so for the accounts that currently require five million or more neopoints, that is, on accounts Millionaire Mega-Platinum and up. For them the necessary amounts will be doubled. That will ensure that ordinary workers are not affected."
"I have an Ultimate Riches! account," the Mayor said. "So I would have to put down ten million more now for it?"
"No. Those who already have those accounts can keep them. However, say that you want to upgrade, then you will need to spend the amount for the next level," Colby said.
There was silence in the room as the people there were considering the implications of that.
"The ordinary worker might not be affected, but wouldn't that in theory make it harder to upgrade to one of those big accounts? We might meet with some resistance on that note as people might view it as a way to stop the common man from rising to the top, so to speak, while the rich are already entrenched at that level," Mrs. Dodds said. "And also, those who have those high-level accounts already, but not Ultimate Riches! wouldn't like it since it is harder for them to move up."
"I have another issue," Golgoth said. "How much are we really saving on something like this? I mean, if we wanted to save neopoints, that doesn't seem like it'll save much. Why not just simply cut the interest rates by 0.5% for everyone with an account over five million neopoints? You know, so Ultimate Riches! will give out only 12% as interest instead of 12.5%?"
"We did consider that," Colby said. "However, there is a general disdain for lowering interest rates. Not to mention that our main problem is that we don't have enough neopoints in our deposits in relation to our debts, and so we need to attract in more depositors, that, or get those who already deposit to deposit even more."
"In that case, why not increase interest rates?" Mrs. Beth said.
"We considered that as well," Colby said. "But the problem with that approach is that we'll spend quite a lot more on interest paid on these deposits, but we do not believe that a small change, of say, one or even two percent to the interest rates for all accounts will not really effect how much people save. Even though the bank does give out interest, the amount given out is small compared to returns in stocks and other places, where people tend to prefer to place their neopoints. We'd go bankrupt trying to give returns like that."
"Couldn't you try this?" the Mayor asked. "Why not create a new type of account higher than Ultimate Riches! and offer a larger interest rate?"
"We'd like to do that," Colby said, "but the thing is that many deposits have much more than ten million neopoints and so it would cost quite a lot in interest to maintain them. Simply put, the bank cannot afford to pay out any higher interest rates on deposits. At the same time, we need more neopoints in deposits, and this seems to be the best way to do so without slashing interest rates which might lead to people withdrawing their neopoints and putting them elsewhere."
There were no objections to this, but Mr. Roberts was far from relieved. After all, the most important, and last proposal was about to come.
Only it wouldn't be coming from Colby. For the first time since the meeting began, Mr. Edgeworth began talking.
To be continued...