01 Part UniversalBanking Part 1
Transcript of 01 Part UniversalBanking Part 1
-
8/12/2019 01 Part UniversalBanking Part 1
1/36
TATA Interactive Systems GmbH. All rights reserved.
Participants Manual Part IIntroduction
Version 1.4
TOPSIM Universal BankingP
-
8/12/2019 01 Part UniversalBanking Part 1
2/36
TOPSIM
- Universal Banking
Table of Contents
1 Forword 1
1.1 Learning Objectives 1
1.2 Using the handbook 1
1.3 Course of the Seminar 2
1.4 Stock Price 2
2 Your Tasks 5
2.1 Farewell Letter from the previous CEO 5
2.2 Overview of Decisions 6
3 Business Banking Unit 7
3.1 Decision: Lending Business 8
3.2 Interest from Investment 10
3.3 Other Decisions in Business Banking 10
4 Investment Banking Unit 11
4.1 Decisions: Securities (Nostro or Own) 11
4.2
Hedging 13
4.3 Bond Issue Business 13
5 Financial Management 16
5.1 Shareholder Policy 16
5.2 Equity Capital Policy 17
5.3 Long term outside financing 18
5.4 Interbank Business 19
6 Wealth Management Unit 21
6.1 Asset Management Business 21
6.2 Custody Business 23
6.3 Sample Calculation: Wealth Management 25
7 Human Resources & Logistic 26
7.1 Human Resources 26
7.2 Employee Capacities & Workload 28
7.3 Logistic Business (PT / IT) 29
7.4 Logistic Units 30
7.5 Indexes in the Human Resource and Logistic Business 31
8 Marketing Business 33
8.1 Decision: Marketing 33
8.2 Sample Advertising Calculation 34
-
8/12/2019 01 Part UniversalBanking Part 1
3/36
-
8/12/2019 01 Part UniversalBanking Part 1
4/36
TOPSIM
- Universal Banking
Page 2 of 34
1.3 Course of the Seminar
In TOPSIM Universal Banking, you will find yourself (along with your teammate) in the role of
General Manager of the SavingsBank Corp. In the beginning, you will receive forms which will help
you gain a general overview of the current status of your bank.
Besides the decisions that are made, many other transactions and activities in the just finished
period are simulated on the computer. The results of the each period can not be calculated until
every team has submitted their decisions for the period. To maintain a fair competition, it is impor-
tant to submit all decisions to the instructor in a timely fashion.
Every team will receive their results (reports), which should be used as the main framework for
making decisions in the following periods. In the beginning of every period, you will also receive
business news, which will provide information about the entire economic situation. This information
provide further clues to making successful decisions, for example, for your condition and personnel
politics. In contrast to a real-life bank, the simulation provides the advantage of receiving the re-
sults about decisions within a short time-frame.
The following course of actions will be visualized with this basic information:
Pictured: Course of a seminar
1.4 Stock Price
For ever bank in the simulation, a separate share price will be determined. This will provide the
quality measurement for the banks performance. In determining the price per share, the following
factors will affect the share price, each with a different weight:
Submission of
decisions
Introduction
Decisions
Evaluation Simulation
-
8/12/2019 01 Part UniversalBanking Part 1
5/36
TOPSIM
- Universal Banking
Page 3 of 34
Balance Sheet Total
Share Price
++
- - -Net losses (in %) of equity capital
Return on Equity
Bridging credit as % of balance sheet total
Depot Performance-Index (Wealth Management)
Planning quality factor
Sum of advertising expenses as % of balance sheet total
Direct earnings per shares (after tax)
Shortage of regulatory necessary equity capital
Shortage liquidity statement II: Overall liquidity
Share price previous period
- - -
- -/++
- -
+++
+
- - -
- -
Service level index ++
Employee satisfaction
Market share loan and deposit business
-
8/12/2019 01 Part UniversalBanking Part 1
6/36
TOPSIM
- Universal Banking
Page 4 of 34
Introduction
Welcome to SavingsBank Corp.!
SavingsBankSavingsBankSavingsBankSavingsBankThe Bank of your Choice
SavingsBankSavingsBankSavingsBankSavingsBankThe Bank of your Choice
-
8/12/2019 01 Part UniversalBanking Part 1
7/36
TOPSIM
- Universal Banking
Page 5 of 34
2 Your Tasks
2.1 Farewell Letter from the previous CEO
SavingsBankSavingsBankSavingsBankSavingsBankThe Bank of your Choice
SavingsBankSavingsBankSavingsBankSavingsBankThe Bank of your Choice
Dear Successor,
My management team and I want to welcome you and wish you a great first day at the Sav-
ingsBank Corp.
As you already know, the previous management team has decided to step down, to make
room for young and fresh talent.
In the past, we have successfully worked in the national and international bank market. Last
year alone, we achieved a profit after tax of 105 million Euros.
The future for banks with great service looks very bright; this caused a study over the predicted
market, as follows:
The competitive situation of many companies has been marked by cost-pressure and market
cultivation. These developments are clearly apparent in the drastic decrease of margin in the
interest business and can lead to further concentration in the market
To create a successful handover, we will leave all information regarding the company and re-
sults of the previous business year.
We wish you much success in the future!
Kind Regards,
Robert F. Chairman
-
8/12/2019 01 Part UniversalBanking Part 1
8/36
TOPSIM
- Universal Banking
Page 6 of 34
2.2 Overview of Decisions
The complexity of the standard-scenarioin Universal Banking increases in every period through-
out the simulation.
The following summary gives you an overview of the individual modules available:
Standard Scenario Module Availability per Period
1 2 3 4 5 6
Business Banking
Lending- / Deposit-Business X X X X X X
Additional Operating Costs X X X X X X
Investment Banking
Securities Trading Business (Nostro) X X X X
Bond Issue Business
Wealth Management
Fixed Asset Management (Customer
type balanced)X X X X
Marketing
Marketing Decisions X X X
Human Resources / Logistic
Automatically generated hires or
dismissalsX X X X X X
Easy HR X X X X X X
Financial Management
Shareholder Policy X X X
Equity Capital Policy X X X
Long-term debt financing X X X X X
Interbank business X X X X X X
Pre-calculation
Allow Pre-calculation X X X X X X
The individual modules can be turned on and off as desired by your instructor. The same holds true
for the modules that may not appear in the standard-scenario. In this situation, it can happen that
the values in the initial scenario (period 0) deviate slightly from the standard-scenario initial situa-
tion.
-
8/12/2019 01 Part UniversalBanking Part 1
9/36
TOPSIM
- Universal Banking
Page 7 of 34
3 Business Banking Unit
Households and companies can put away money, which is not needed in the short-term, in various
interest-bearing investment options. On the one hand, large investments can often times not be
completely financed on your own. Therefore it is necessary to make credit extensions and take on
investments to secure other.
A common aspect about a bank is its so-called transformation function; this is the banks ability to
cover a large credit by bundling many smaller deposits (lot size transformation). Additionally, the
bank can take on the various credits and deposits of maturing deposits and credits (term transfor-
mation). The last dimension of transformation is the credit risk transformation. Only the existence of
banks and their equity makes it possible for companies to get large loans.
The credit business (receivables from customers) identifies the sum of the assets, specifically
loans, that the bank has given to customers. This is the asset side of the banks balance sheet.
The deposit business (liabilities due to customers) of a bank is the refunding side, which is respon-
sible for taking on customers money in the form of investments. The deposited money is accounted
for in the liabilities side of the balance sheet. The portion of borrowings in banks is generally, in
comparison to other companies, much higher.
The SavingsBank Corp. offers the following Products and Services in the area of Business Banking:
LENDING BUSINESS DEPOSITS BUSINESS
Receivables from customers Liabilities due to customers
Loans secured by mortgage Savings account
Otherwise secured loans Personal account
Unsecured Current account
Mortgage claims Fixed term-deposit
With variable interest rate Medium-term notes
With fixed interest rate
In the area of Business Banking, you must determine the interest rate conditions for the credit
extensions (Credit market) and the taking on of customer money (deposit market). Additionally, to
keep tabs on what the competition is doing, you can purchase a Market and Competition Report.
The area of planning values is used to ensure that you are reaching your goals, and has an influ-
ence on the share price of your bank.
-
8/12/2019 01 Part UniversalBanking Part 1
10/36
TOPSIM
- Universal Banking
Page 8 of 34
3.1 Decision: Lending Business
In the credit market many different decisions have to be made:
Participant Decision 1:You will have to make decisions regarding Mark-ups and Mark-downs in
the following areas. The decision has to be made in the three main categories (loans secured by
mortgage, loans secured by other collateral and unsecured loans). Additionally, you have to take
these decisions for the individual ratings.
You can control the composition of your portfolio by deciding on the interest rates. Generally, attrac-
tive interest rates (low rates) will lead to a higher market share. Accordingly, a high interest rate will
lead to a low amount of new business. Yet, your market share does not just depend on the interest
rates but also on your competitors interest rates. Therefore, it can happen that you offer a low inter-
est rate in a certain credit category but still have a low market share. This could be the case if your
competitors offer lower interest rates than you.
For the Mark-up and Mark-down decisions, a minimum (-1.5%) and a maximum (+1.5%) are set in
place for all customer ratings.
Information regarding the expected interest rates in the upcoming period can be found in the sce-
nario text. Information regarding your competitors decisions (in the previous period) can be found
in the Market and Competition Report, which can be purchased from the external market research
institute for 3 million Euros (see Section 3.3.1).
Participant Decision 2:Your second decision has to be made regarding the Additional Operat-
ing Costs. This decision is made once and applied to all credit categories. Operating costs are
expenses incurred through staffing and infrastructure maintenance. These costs include all costs,
from the credit check area all the way to offering financial advice to customers. In period 0, the
additional operating cost was 0.6%
-
8/12/2019 01 Part UniversalBanking Part 1
11/36
TOPSIM
- Universal Banking
Page 9 of 34
3.1.1 Explanation: Calculation of Credit Interest Rates
The interest rate for credits is derived from a mixture of the basic interest rate (refinancing interest
rate), the rate of acceptable risk, and the cost of capital. In the participant system, you will find the
basic rate of interest, which already includes the refinancing interest rate, rate of risk and cost of
capital. This basic rate changes from period to period according to the economic development andthe overall interest rates.
Refinancing Interest rate: the refinancing cost comes from the costs of getting the money
for credits, international money and capital markets are included. The amount of these
costs depends on the market interest rate over time.
Cost of Risk:risks are in the nature of the credit business. Credits can be threatened or
default all together. The risk in credit includes the default risk. The credit risk therefore is
the loss in value of the money following a default on a loan, as well as the diminution of
bonds. The cost of risk can vary between 0.001% to 4.00% for the individual ratings.
Cost of Capital: After taking into consideration the loss from the cost of risk, all expected
risks having been accounted for. Now the only risk still existing is the fact that it is not pos-
sible to determine how much loss is going to happen in each area. This risk is not covered
by a risk premium but instead by your own capital. Therefore banks are forced, by law, to
cover risks with their own capital. The return on the equity capital will also be taken into
consideration.
Additional Operating Costs (Participant decision): see explanation above.
Mark-up / Mark-down (Participant decision): see explanation above.
3.1.2 Explanation: Customer Rating
The customer rating mirrors the creditworthiness of a customer, and therefore shows the ability to
repay on the financial obligations. In TOPSIM Universal Banking, all credit customers fall into one
of five rating categories; the following chart illustrates the rating classes from Standard & Poor and
how they translate to TOPSIM Universal Banking ratings:
Rating:
TOPSIM
Universal
Banking
Rating:
Standard
&
Poor's
Description
+++AAA
Best Rating. The company is highly capable of paying interest and
making repayments.
++AA The company is capable of paying interest and making repayments.
+A
The company has a good creditworthiness, which, however could be
negatively influenced by external political or economic factors.
-BBB
The chances for timely repayment are good. Changes in the eco-
nomic conditions could, however, impact the ability to repay.
--B
The chances that the customer can repay the loan long-term are
somewhat small.
-
8/12/2019 01 Part UniversalBanking Part 1
12/36
TOPSIM
- Universal Banking
Page 10 of 34
3.2 Interest from Investment
Participant Decision:You must decide on the interest rates (in %) of your deposit business.
On the contrary to the decisions that have to be made in the credit market, here decisions regarding
the absolute values have to be entered into the decision form.
The interest rate decision has to fall in between + / - 1.5 % of the interest rates given in the respec-
tive economic news. The interest rates for the deposit market can be taken directly from the eco-
nomic news.
Regarding the determined interest rates, you can influence the market share of the new volume of
individual loan products. Generally, higher interest rates should lead to a higher market shares
because customers prefer to get a higher interest rate for their investments. The development of
your market share also depends on the interest rates of your competitors.
3.3 Other Decisions in Business Banking
3.3.1 Market and Competition Report
Participant Decision:You must decide if you want to purchase a Market and Competition Report
(yes/no).
To receive information regarding your competition, you may purchase a market research report (3
million Euros) from an external market research firm. The cost of this report will affect your profit
and loss account. The research report includes information regarding the balance sheet, profit and
loss statement, interest rates and markets shares of competitors.
3.3.2 Planning Values
Participant Decision: Deciding on planning values for the balance sheet sum, net profit, lending
and deposit business (all in millions of Euros).
In the participant system, planning tools are at your disposal. These give you the chance, with the
general knowledge of the development of the market (scenario texts) and assessment of competi-
tors (Market and Research Report) And your own decisions, to lead a planning analysis. Each run-
through of the planning values cost 0.1 million Euro (in period 1). The final values are automatically
used by the decision system, so that the values which have been entered into the planning tool do
not have to be entered again.
In each periods Planned / Actual analysis, a quality of planning will be assessed by a simple calcu-
lation. The quality of planning will affect your banks share price.
A good planning is of special importance when it comes to resource planning (advertising, logistic,
human resources, etc).
-
8/12/2019 01 Part UniversalBanking Part 1
13/36
TOPSIM
- Universal Banking
Page 11 of 34
4 Investment Banking Unit
In the standard scenario of TOPSIM Universal Banking you are only responsible for the area of
the security trading business (Chapter 4.1 and 4.2). The area of bond issue business (Chapter 4.3)
is not part of the standard-scenario and therefore only relevant if the instructor decides to activate
that module.
Note about the exchange rate in TOPSIM Universal Banking:
The given exchange rate follows a standard system. It is given how many units of domestic money
(Euro) is given for one unit of foreign currency (USD). This is called price quotation.
Example:
Period 1 Purchase of shares (in USD) 10,000 EUR
Price per share 1.00 USD
Exchange rate USD / EUR 0.85 EUR
Number of shares (10,000 / 0.85 EUR) 11,765 Shares
Period 2 Share price is unchanged
Exchange rate USD / EUR 0.75 EUR
Value of shares (11,765 x 0.75 EUR) 8,824 EUR
Exchange loss (not yet realised) 1,176 EUR
4.1 Decisions: Securities (Nostro or Own)
In the security business, you decide on the investment decisions for the nostro inventory. By in-
vesting in securities, the profitability of your bank can increase drastically. However, this type of
business also involves high risk. Therefore, you must back the securities with enough equity capital.
You have the following investment options:
INVESTMENT CURRENCY
Domestic money market EUR
Foreign money market USD
Domestic shares EUR
Foreign shares USD
Domestic bonds EUR
Foreign bonds USD
Participant Decision 1:Make decisions in each asset category concerning the purchase / sale (in
million Euro).
Information regarding individual asset categories can be found in the next chapter.
Participant Decision 2:Make a decision, if your price risk (in the stock and bond market) and
exchange rate risk (for investments in USD), should be hedged or not. You make the decision to
protect securities from price losses (line HEDGING Price) and/or foreign currency risk (line HEDG-
ING USD) by selecting either No/Yes (double click in the specific box or entering Y/N).
-
8/12/2019 01 Part UniversalBanking Part 1
14/36
TOPSIM
- Universal Banking
Page 12 of 34
More information regarding hedging can be found in section 4.2. Additional notes regarding the
exchange rate and the foreign currency can be found in the scenario text.
4.1.1 Money Market
Money market investments are short term investments with a maximum maturity date of 12 months.
The money market investments from the previous period will be repaid at the beginning of the fol-
lowing period. For this reason, only the purchase of such investments can be made. There are
domestic as well as foreign money markets available for purchase.
4.1.2 Stocks
The owner of a share of stock is automatically a partial owner of the company. The share entails
ownership and participation rights. Investments in Stocks are usually riskier than money markets
and bond investments. Domestic as well as foreign shares are available for purchase.
Note:The purchase and sale of stock always takes place at the closing price of the previous pe-
riod.
4.1.3 Bonds
Bonds are fixed securities, which are commonly used for long-term investments by large compa-
nies. Bonds usually carry lower risk than stocks. But the owner of a bond is susceptible to changes
in the interest rate. Both domestic and foreign bonds are available for purchase.
The purchase of bonds is always done at par (100% of the bond). Because the bonds interest rates
are fixed, their value is influenced by changes in interest rates.
Note:Purchases are made at the closing value of the previous period and they follow FIFO.
-
8/12/2019 01 Part UniversalBanking Part 1
15/36
TOPSIM
- Universal Banking
Page 13 of 34
4.2 Hedging
Hedging transactions are financial transactions executed to protect against unfavourable exchange
rate developments or price risks. In TOPSIM Universal Banking, you can insure against the
above-mentioned risks by purchasing PUT options. A PUT option is the right to sell securities or
foreign currencies at a later date for a price that was determined in advance.
The hedging takes place at the beginning of the periods.Hedging transactions protect the invest-
ments during the valuation for the final balance sheet against any foreign currency and exchange
rate losses. To protect against financial risks again in the following year, the specific boxes must be
marked once again, otherwise no protection against unfavourable exchange rate developments or
price risks exists in this year.
To protect individual fixed assets, the following cost should be included in the calculation:
INVESTMENT COST OF PROTECTION
Stock 3 %
Bonds 2 %
Foreign Currency 2 %
4.3 Bond Issue Business
In case the instructor has given access to the investment banking module, then in each period the
up to three bonds can be placed at the markets for customers. In this business it is possible to raise
additional profits, but also gives additional risks in incurring losses.
In the Economic News, the following information will be provided regarding investments:
Issuer Rating
Maturity
Investment amount
Minimum underwriting price
Interest rate for a underwriting quota of 100%
The rating provides information regarding the quality of the issuer. The worse the rating, the higher
the likelihood that the outstanding bond will not be fully covered by customers.
4.3.1 Decision: Bond Issue Business
Participant Decision 1: You decide on the interest rate (in %) of the bond emission. It is neces-
sary to orient oneself at the requirements of the capital market as well as the rating of each issuer.
-
8/12/2019 01 Part UniversalBanking Part 1
16/36
TOPSIM
- Universal Banking
Page 14 of 34
Participant Decision 2: You need to determine the price for which you would carry over the whole
amount. The emission amount is 100%. The given minimum price can not be undercut. If you do
not want to participate in the bidding process, then the underwriting price should be left at 0%.
The difference between the emission value (100%) and the lower underwriting price should at least
cover the costs that the bank is incurring.
4.3.2 Handling of the Bond Issue Business
Award: The bank making the customer the most favourable offer (based on the offered interest rate
and the underwriting price) is awarded the issue. If several banks have made the same offer, the
bond is divided among them.
The bond issues taken on, will immediately be placed by your customers.
The price is always 100%. Whether the bond will be fully subscribed or not depends on:
The fixed interest rate of the bond compared to the market interest rate (for bonds ;
see scenario texts).
the issuers rating.
If the total issue cannot be placed completely (subscription rate less than 100%), the unsold
amount will be sold immediately at a reduced rate (difference between the issue price and lower
stock exchange price).
4.3.3 Costs of the Bond Issue Business
Taking over a bond causes fixed and variable costs. The fixed costs will be 10 million Euros and will
be charged as soon as the bank offers an underwriting price. The variable costs are always 1% of
the allocated issue amount.
4.3.4 Example: Bond Issue Business
The bank with the lowest emission costs is awarded the issue. If two banks offer the exact same
conditions and both receive part of the award, then the volume will be divided between the two
institutions.
EXAMPLE BANK 1 BANK 2
Maturity 8 8
Issue Amount (mEUR) 2,000.00 2,000.00
Interest at subscription quota 100% 8 8
Interest (%) 7.20 7.90
Underwriting price (%) 95.00 99.00
Payment to issuer (m EUR) 1,900.00 1.980.00
Loss (mEUR) -100.00 -20.00
Total Interest payments (mEUR) -1,152.00 -1.264.00
Costs Issuer (mEUR) -1,252.00 -1,284.00
In this example, both banks expected to receive the entire award, but because both banks selected
an interest rate lower than the current market interest rate, both parties incurred an overall loss.
-
8/12/2019 01 Part UniversalBanking Part 1
17/36
TOPSIM
- Universal Banking
Page 15 of 34
Per % difference of interest 0.25 0.25
The subscription quota decreases by ...% 4.00 4.00
Interest difference (%) 0.80 0.10
Subscription quota (%) 87.20 98.40
Bank 1 has won the award, but it is not able to place the entire bond on the markets, which causesit to accept a deal. The loss is the higher the lower the subscription quota. Bank 2 has also partici-
pated in trying to get the emission and therefore must also carry the fixed costs. If bank 2 had got-
ten the award, then it would have had -10.26 million Euro loss, even though it can almost place the
entire volume.
Bond earnings (m EUR) 100.00 20.00
Deal (m EUR) -16.38 -0.26
Variable Costs (mEUR) -20.00 -20.00
Fixed Costs (m EUR) -10.00 -10.00
Profit/Loss of the Bond Issue Business 53.62 -10.26
-
8/12/2019 01 Part UniversalBanking Part 1
18/36
TOPSIM
- Universal Banking
Page 16 of 34
5 Financial Management
The Financial Management business deals with the banks shareholder policies, equity capital
policies and liquidity planning.
5.1 Shareholder Policy
Participant Decisions: You must decide, if and how much of the previous years profit (or a portion
of other reserves) you would like to return to shareholders.
The bank may disburse its profits in the form of a dividend. The shareholder policies impact the
share price on the one hand, but also the banks equity
Publicly traded companies usually avail themselves of a dividend to disburse profits from the prior
year (or a part thereof) to the shareholders. Even if the bank incurred losses during the prior year, it
may still disburse dividends and take it from the Other Reserves.
The dividend policy has an effect on the stock price of individual banks, the liquidity, and the equity
capital and therefore also the Return on Equity (RoE). Keeping profits in the bank increases the
equity capital.
Example of a dividend disbursement:
DIVIDEND DISBURSEMENT
Equity Capital (mEUR) 800
Nominal Share Value (EUR) 20.00
Number of Shares 40,000,000
Net Earnings (Prev. Yr. / mEUR) 150
Share Price (Beginning of Period / EUR) 100
Dividends per Share (Decision EUR) 1.20
KEY FIGURESDividends (% from nominal share value) 6.0
Dividends (% / after-tax)1)
0.91)Dividends less tax in percent of the share price
DISTRIBUTION OF PROFITS
Legal Reserves (mEUR)2)
7.5
Shareholders (Dividends / m EUR) 48.0
Other Reserves (Mio. EUR) 94.52)
5% until the legal limit 10% from the capital equity
-
8/12/2019 01 Part UniversalBanking Part 1
19/36
TOPSIM
- Universal Banking
Page 17 of 34
5.2 Equity Capital Policy
Equity capital is the basic building block of business operation in every company. The bank is re-
sponsible for protecting itself from risk by always having enough equity capital to back defaults
which may occur. The underlying legal rules are outlined in the Basel II regulations.
This Basel equity capital agreement was signed at the Bank for International Settlement (BIS). The
main goal of this agreement is to improve the stability of the international financial system. The
overall banking system is trying to reach capital levels that could decisively reduce the risk of bank
insolvencies.
More specific information regarding the regulation of equity capital can be found in part 2 of the
participation manual.
5.2.1 Increase in Capital / Repayment of Capital
Participant Decision: You must decide how much you would like to increase (+) or repay (-) equity
capital (in mEUR)
5.2.2 Increase in Capital (+)
Every bank has the chance to increase capital, as long as the module has been turned on by the
instructor. An increase in capital is absolutely necessary if the equity capital is not enough to cover
the risks of the bank. Please note, that an increase in the equity capital causes the return on equity
to decrease.
ISSUE INFORMATION INCREASE IN CAPITAL
Issue price of new shares (% of share price previous reporting period) 60 %
Maximum increase in capital (% of equity capital of previous reporting period) 50 %
Nominal share value (EUR) 20.00
CALCULATION EXAMPLE FOR AN INCREASE IN CAPITAL
Increase in capital (Decision / mEUR)
through issuing 12,500,000 shares with a nominal value of 20 EUR each
250
Share price (Previous period in EUR) 80.00
Issue price per share (60 % of EUR 80) 48.00
Offering premium per share (EUR 48 EUR 20) 28.00
ADDITIONAL CAPITAL THROUGH INCREASE IN CAPITAL
Increase in equity capital (Mio. EUR)
(12,500,000 shares x EUR 20 nominal)
250
+ Offering premium (Mio. EUR)1)
(12,500,000 shares x EUR 28)350
= TOTAL CAPITAL INCREASE (Mio. EUR) 6001)
The offering discount must be transferred to the legal reserves.
-
8/12/2019 01 Part UniversalBanking Part 1
20/36
TOPSIM
- Universal Banking
Page 18 of 34
5.2.3 Repayment of Capital
A repayment of capital makes sense, when overcapitalization should be stopped. The bank is over-
capitalized, if the ratio of capital to potential risk is too high. Overcapitalization negatively influences
the banks profitability and the profit rate per share, which can have a negative impact on the share
price.
If the bank generates the same profits with less capital, the capital profitability increases.
CALCULATION EXAMPLE FOR REPAYMENT OF CAPITAL
Repayment of capital (Decision / mEUR)
with the withdrawal of 5,000,000 shares with a nominal value of 20 EUR each
- 100
Share price (previous period / EUR) 80.00
Nominal share value (EUR) 20.00
CAPITAL REDUCTION THROUGH CAPITAL REPAYMENT
Reduction of equity capital (mEUR)
(5.000.000 shares x EUR 20 nominal)
- 100
+ Reduction of reserves (mEUR / shares at par value)
(5.000.000 shares x EUR 60)
- 300
= TOTAL CAPITAL REDUCTION (mEUR) - 400
Please note: that enough liquidity has to remain when decreasing the equity capital.
5.3 Long term outside financing
Long term outside financing describes the acquisition of capital to cover medium and long term
financing needs by issuing long term bonds on the capital market.
5.3.1 Decision: Issuing of Own Bonds
Participant decision: Decide if and in what amount (mEUR) you would like to issue bonds.
The bank can issue bonds with a maturity of 10 periods and a fixed interest rate to obtain long term
outside financing. A bond is a security that allows a middle or long term increase in capital. A bond
is a security used to obtain medium or long refunds on the capital market. The bond purchaser
receives annual interest payments. The borrowed amount is repaid at the end of the term.
The interest rate is determined by the current demand in the capital market; it can be called in early
based on the economic situation in each period. In addition, the following must be noted:
The decision of the current period is additiveto the previous periods.
Per period, a certain volume of bonds issued in the past will mature. (For repayment amounts,please refer to the balance sheet appendices)
INFORMATION REGARDING BONDS
Maximum issue volume (mEUR) 1,000
Maturity (periods) 10
-
8/12/2019 01 Part UniversalBanking Part 1
21/36
TOPSIM
- Universal Banking
Page 19 of 34
5.3.2 Decision: Subordinate Bond Issues
Participant Decision:You must determine the share of the issued bonds which should be issues
as subordinated bonds. The decision is made in mEUR and the maximum amount is the total
amount of long term bonds issued in the current period.
In the event of a liquidation or bankruptcy of the issuer, the claims of holders of subordinate bond
issues are subordinate to the claims of non-subordinate holders. The banks can include subordi-
nate bonds in their supplementary capital (up 50% of the total capital) according to Basel II- regula-
tions. Subordinate bonds can therefore be used to fulfil the regulatory capital requirements.
INFORMATION REGARDING SUBORDINATE BONDS
Interest margin in comparison to the bond issue + 0,50 %
Maximum issue volume (mEUR) 1,000
Maturity (years) 10
Maximum total subordinated bonds of required capital (max. % core capital) 50 %
5.4 Interbank Business
The term interbank business is used to describe banking transactions between commercial banks.
Interbank transactions constitute a large part of the money and capital market. Commercial banks
involved in interbank transactions assume a very small counterparty risk. Both parties must be
profitable and have a very good l iquidity, in order to perform interbank business.
The interbank business is an important reference point in regards to the customer business. Banks
will not incur customer businesses at conditions which are worse for the bank than the conditions in
the interbank business.
5.4.1 Decision: Due from Banks
Participant Decision:Decide if and how many millions of Euros should be invested in the inter-
bank business (due on demand and / or at term).
Interest rates for investments at terms are slightly better. The respective amounts are deducted
from the liquid assets and thus lead to interest profits. The interest rates are dictated by the market.
The investments in the interbank business should be made in order to avoid non-interest bearing
cash holdings.
Decisions relating to these items are in absolute terms and not additive to the prior period. This
means that the volumes entered for the receivables from banks will be listed in the balance sheet at
these amounts.
You can invest a maximum of 10,000 mEUR in each of the options. When making investments, it is
important to also keep the refinancing aspect in mind. If not enough refinancing funds are avail-
able, then costly overdraft fees will be applied through the use of a bridging credit.
-
8/12/2019 01 Part UniversalBanking Part 1
22/36
TOPSIM
- Universal Banking
Page 20 of 34
The old management has the following assets in the interbank business (period 0):
Due from banks on demand 600 mEUR
Due from banks at term 6,500 mEUR
5.4.2 Decision: Due to other Banks
Participant Decision: In this decision field, different to the due from other banks, you need to
make a decision regarding the interest rate (in %). The interest will affect other banks willingness to
invest their money at your bank. The reaction is very sensitive, you must therefore decide very
carefully on a reasonable interest rate for due on demand and due at term..
You will find information regarding the expected interest rates and the expected growth of the mar-
ket in the economics section of the scenario.
Interest rate decisions can be adjusted a maximum of the following values from the provided rates
in the Economic News:
GREATEST INTEREST RATE DEVIATION FOR INTEREST RECEIVABLES FROM BANKS
Liabilities towards banks, maturing daily 0,50 %
Liabilities towards banks with a fixed term 0,50 %
The interest rates directly impact the market behaviour of the other banks. Therefore the rate of
interest is the determining factor of the amount of interbank business you will receive. Banks like to
get high interest rates; therefore you will generally get more business with a high interest rate. But,
the amount of interbank investment also depends on the interest rates of your competitors, as they
may steal business from you by having better interest rate conditions than your bank.
5.4.3 Decision: Cash Management
Participant Decision:You must decide if you would like to let an external service company make
decisions regarding cash management.
A cash manager looks for short term investment opportunities for liquid assets. For this service, the
service company gets a fixed payment of 15 mEUR per period (in period 1).
The advantage of using a cash manager is that it invests your liquid assets (in the balance sheet) in
short term investments with low interest rates and avoids non-interest bearing cash holdings. The
service is that the cash manager finds these investments for you.
In period 1, the cash manager has the advantage that it can find investments that would give you areturn of 1.9% on your liquid assets.
-
8/12/2019 01 Part UniversalBanking Part 1
23/36
TOPSIM
- Universal Banking
Page 21 of 34
6 Wealth Management Unit
Wealth Management provided by the banks offers comprehensive services and products for cus-
tomer-specific investment solutions.
Customers have the option to have their portfolio managed by one of the banks investment special-ists, by granting an investment management mandate, authorizing such specialists to make in-
vestment decisions. Customers hope for higher returns than are available in the deposit business,
and are willing to take on a higher risk for the higher returns. The current wealth management busi-
ness of your bank has a value of 12,800 MEUR.
Furthermore, your bank offers customers with the custody business the opportunity to invest in
securities themselves. For this reason, the bank receives custody charges and brokerage fees from
the customer.
6.1 Asset Management Business
6.1.1 Decision: Asset Allocation
Private banking (Asset management) involves determining the investment strategy for a particular
customer type (so called, high net worth individuals) or, if an additional module is turned on, two
customer types (with conservative or dynamic investment profile), whose assets are managed bythe bank based on an asset management mandate. In the standard-scenario of TOPSIM Univer-
sal Banking, only the balanced customer type is available. The following investment options are
available for the investment specialists within your bank:
-
8/12/2019 01 Part UniversalBanking Part 1
24/36
TOPSIM
- Universal Banking
Page 22 of 34
INVESTMENTS CURRENCY
Domestic money market EUR
Foreign money market USD
Domestic shares EUR
Foreign shares USD
Domestic bonds EUR
Foreign bonds USD
Participant Decisions:You will allocate percentages of the customer assets managed by the bank
to individual asset types. You have to comply with the mandatory minimum and maximum volumes
established by your banks management. In total, 100% of all the money must be invested.
Investments are bought and sold at the beginning of each reporting period for the prices from theend of the previous period.
Hints regarding the further development of the market can be found in the economics news.
Private banking (Asset Management) refers to the diversification of monetary investments, the
allocation of the invested assets to various investment types (bonds, shares, money market papers,
currencies etc). The total yield and total risk of a portfolio can be managed by changing the asset
allocation. This can be done by redistributing the assets among the portfolio's individual asset cate-
gories.
6.1.2 Decision: Hedging
Participant Decision:You must decide if you would like to insure your customers money against
exchange loss (in all investment areas) and/or market price risks (in stock and bonds business). If
you would like to hedge the investment you have made for your customers, then place a check
mark in the appropriate box in the decision screen.
The costs of hedging are taken from wealth management deposits and have a negative impact on
the performance of these deposits. The costs for hedging are the same as in the investment bank-
ing business (see sect. 4.2).
6.1.3 Decision: Wealth Management Fees
Participant decision:You must decide on the wealth management flat fee (in % of managed as-sets). This fee will be charged to customers for your service.
Through the wealth management fee, you are able to cover your costs in the wealth management
sector and give your bank additional income. Customer behaviour in the Wealth Management Busi-
ness is also determined by how your rate compares to that of competitors. The higher your fee in
comparison to competitors, the more customers you will lose. Customers once lost are difficult to
win back.
The fee can be a maximum of 5%. At the beginning, your fee is at 2%. This is an all inclusive fee.
Your customers do not get charged any additional costs such as for regrouping.
The income from the Wealth Management Business can be found in the commission income form
the securities and investment business in the profit and loss accounts.
-
8/12/2019 01 Part UniversalBanking Part 1
25/36
TOPSIM
- Universal Banking
Page 23 of 34
6.1.4 Decision: Consulting Fee
Participant decision:You must decide how much time your employees should spend for advising
customers in the wealth management area (in %).
If consulting is intensified, customers with a high savings or portfolio volume could be persuaded to
let the bank manage their funds by issuing a management mandate. Spending time in consultancy
directly leads to less available time in other activities.
By properly advising customers, they may be persuaded to give a management mandate instead of
investing their money in the different types of deposit accounts.
The decision in the Human Resource module (number of employees in the wealth management
sector: acquisition and support; see chapter 7.1.3) are directed towards obtaining new customers
towards existing customers who have had their money in the wealth management sector before.
Employees in the wealth management business can spend a maximum of 20% of their time for
consulting customers, From prior market research, you know that most competing banks invest
about 5% of their employees for consulting.
6.1.5 Performance index in the private banking business (PI)
The volume of the asset management business is strongly influenced by your banks overall return.
The Performance Index (PI) is calculated as following:
CALCULATION OF THE PERFORMANCE INDEX (PI)
Interest money market investments and bonds
+ Dividend Shares
Price losses / -gains of stocks and bonds
Currency losses / -gains (EUR)
- Hedging costs
- Fee (flat fee of transactions)
= Customers total net result (income)
PI =Customers total net result x 100
(Volume at the beginning of the period + Volume at the end of the period) / 2
A high performance index in comparison to your competition leads to a high market share in the
wealth management business.
6.2 Custody Business
In the custody business, the bank gives customers the opportunity to access stock markets on their
own responsibility. The decision regarding which securities get bought and sold remains with the
customers. In the introduction period of the custody business, customers deposits amount to
50.000 mEUR.
-
8/12/2019 01 Part UniversalBanking Part 1
26/36
-
8/12/2019 01 Part UniversalBanking Part 1
27/36
TOPSIM
- Universal Banking
Page 25 of 34
6.3 Sample Calculation: Wealth Management
Sample Calculation: Profits and Expenses
(Assumption: Volumes stay constant and when determining the commission fees, no changes will
take place. No change in personnel will occur either.)
Wealth Management:Volume: 12,800 m EUR
Fees (Participant Decision) 2 %
Income from Wealth Management (12,800 mEUR * 2 %) 256 mEUR
Custody Business:Volume 50,000 mEUR
Stock market turnover volume 40 %
Depot Fees (Participant Decision) 0.2 %
Brokerage fee(Participant Decision) 0.8 %
Income from the Depot Business 260 mEUR
(50,000 * 0.2 % + 50,000 * 40 % * 0.8 %)
Commission income from securities and investment business 516 mEUR
Commission Expenses:Commission Expenses Wealth Management 0.4 %
(Volume of Wealth Management & Depot Business)
Total Commission Expenses (0.4 % * 62,800 m EUR) 251 mEUR
Return from securities and investment business 265 mEUR
(profit and loss statement)
Personnel Expenses:Personnel Wealth Man. (Assumption): 1,600 Employees
Salary per Employee (Example) 92,000 EUR
Additional Personnel Costs 10 %
Total Personnel Expenses (1,600 * 92,000 EUR * 1.1) 162 mEUR
Result from securities and investment business (Total) 103 mEUR
-
8/12/2019 01 Part UniversalBanking Part 1
28/36
TOPSIM
- Universal Banking
Page 26 of 34
7 Human Resources & Logistic
7.1 Human Resources
Human Resource is the common term associated with the hiring and development of employees.
To reach the company goals, the department has to maintain a clear oversight of all areas concern-
ing personnel.
Organizational chart of your bank(with all possible business areas):
As a member of the simulated banks management team, you are responsible for all HR-related
issues for the five business units listed above.
7.1.1 Decision: Employments / Dismissal
Decisions regarding employments / dismissals are not part of the standard TOPSIM Universal
Banking simulation. Depending on the module selection made by your instructor, the personnel
decisions may be made by the simulation itself. In such a case, the decision field would be greyed
out.
Participant Decision:You make decisions regarding the number of hirings (+) and dismissals (-) in
each individual business unit.
Hiring new employees is necessary when the current personnel resources are not sufficient and the
bank has to pay costly overtime to current employees or even hire temporary workers.
Dismissals make sense when there are idle employees in the bank, and therefore unnecessary
costs are incurred.
When hiring new employees, it must be considered that they require a vocational adjustment period
during the first year, during which they cannot work productively. Employing and dismissing per-
sonnel is therefore very cost-intensive. Figures regarding employments and dismissals can be
found in sect. 7.1.5.
Management
Business Banking
Lending BusinessInvestment Banking
Wealth
Mana ement
Business Banking
Deposit Business
Logistics
PT / IT)
-
8/12/2019 01 Part UniversalBanking Part 1
29/36
TOPSIM
- Universal Banking
Page 27 of 34
7.1.2 Decision: Training Days
Participant Decision:You must decide how many days in each period employees will spend in
training and development. A decision must be made for each individual business unit.
Giving employees training days in each period significantly increase their performance and also hasan effect on the sale of services. When you have productive employees working at your bank, then
you will need fewer employees for the same amount of work. Yet, having employees spend time in
training takes them away from the daily operations of the bank.
The training costs per employee/day amount to 1,000 EUR. Please refer to the report on Human
Resources / Logistic for the employees' training status.
In period 0, the following decisions had been made by the old management team (not all business
areas have been available at that time):
AREA LENDING BUSINESS DEPOSIT BUSINESS LOGISTIC
Number of training
days
4 4 2
In future periods, this decision can also be made in additional business areas within the bank (such
as Wealth Management).
7.1.3 Decision: Utilization Acquisition and Service
Participant Decision:In this area, you must decide how many resources you would like to make
available for acquisition and service (in % of the entire personnel on hand in the respective area).
Both decisions have to be made for each individual business unit except for the Financial Manage-
ment unit, in which no decision has to be made.
You may not utilize more than 20% of the working hours available for acquisition and customer
care. The rest of the resources go toward processing. In period 0, employees spent 5% of their time
for each activities - acquisition and service.
If many resources are invested in the acquisition of new business and providing good service to
existing customers, it will have a positive effect on your market share directly (acquisition) or
indirectly( via the service level).
Please note that the training, acquisition, and customer care initiatives may take up a large amount
of your capacities. Therefore, if the work that needs to be done in the back office cannot be per-
formed by full-time employees and overtime (at the most 10% of the regular working hours), then
the system automatically recruits expensive temporary personnel.
For this decision, proper planning is essential. To guide you in the decisions, a planning tool is
available in the participant system.
7.1.4 Decision: Incentive Bonus based
Participant Decision:Decide on the amount of bonus (in % of base salary), which will be paid in
addition to the salary. Once again, this decision has to be made for individual business units.
The bonus amount primarily affects employee satisfaction. High employee satisfaction lowers the
turnover rate and thus the costs for new hires.
-
8/12/2019 01 Part UniversalBanking Part 1
30/36
TOPSIM
- Universal Banking
Page 28 of 34
In addition, a bonus that is higher than the bonus paid by a competitor may attract qualified em-
ployees, which, in turn, positively impacts the educational status of your banks employees.
The old management has made the following decisions in period 0:
AREA LENDING BUSI-NESS
DEPOSIT BUSINESS LOGISTIC
Bonus
(in % of base salary)
4 4 2
7.1.5 Employment Figures Period 0
BUSINESS BANKINGBUSINESS UNIT Lending
BusinessDeposit
Business
FINANCIALMANAGEMENT
LOGISITC(PT / IT)
Employment Costs (EUR) 25,000 20,000 25,000 15,000
Dismissal Costs (EUR) 7,500 5,000 7,500 4,000
Training Period (Hours) 500 300 500 200Salary and Wages (EUR) 75,000 70,000 75,000 55,000Temporary worker compensation(EUR/Hour)
60 60 60 60
Industry salaries are average salaries in the different business units. The yearly salaries can be
found in the economics section of the scenarios.
Costs for overtime hours are 25% of the salaries.
7.2 Employee Capacities & Workload
A good service level and time spent on acquisition as well as employee qualification have a positive
influence on the market share in the respective business unit. But it is thought that with highamounts of time spent on acquisition/service and training, the work-load capacity is not large
enough to handle the daily operations. If the everyday operations can not be completed by the full-
time employees, even with overtime (10 % of the work-time), then the system will automatically hire
temporary workers. With too many temporary workers, the quality of service is drastically reduced
and customers will start to leave the bank.
Along with your decisions, you should keep in mind that with a higher level of automation, the pro-
ductivity and satisfaction of your employees increases. This means that with more productive
workers, less personnel is needed to complete the necessary work.
If the decisions regarding employment / dismissals are made by the system automatically (standard
scenario), overtime and temporary employees are never needed. The system will automaticallyalways keep enough personnel on-hand to complete the job without using the costly extra workers.
The following is an example will assist in making decisions regarding employment and dismissal, in
case that decision is not automatically made.
-
8/12/2019 01 Part UniversalBanking Part 1
31/36
TOPSIM
- Universal Banking
Page 29 of 34
Example (Employments / Dismissals not automated):
General Figures: Total Hours worked per year (WPY): 1,825 Hours
Hours per day (WT): 8.2 Hours
Induction time new employees (ITE): 500 HoursDecisions: Acquisition, Mentoring, Consulting: 0 % each
Training (Train): 4 Days
So, the total number of hours available for each employee are:
When the bank has 5,000 employees, 6,461,000 hours are available.
Yet, when 7,000,000 hours are necessary, an additional 539,000 hours are needed.
418 more employees would need to be hired. This number is calculated automatically by the sys-
tem in case the Hiring / Dismissals are automated (Overtime is not taken into account).
To calculate the expected workload and necessary number of employees, a planning tool is avail-
able in the participants system.
7.3 Logistic Business (PT / IT)
The logistic business in the simulation is divided into branch networks and internal services with the
areas of payment transactions (PT) and Information Technology (IT).
7.3.1 Branch Network
The bank in the simulation has 20 branches. Additional branches may increase the service quality.
This would have a positive impact on the acquisition of new customers. From past periods, the
following information is available:
INFORMATION REGARDING BANK BRANCHES
Number of Branches 20
Value (Balance / mEUR) 90.0
Depreciation (%) 10.0
100%
100% 0% 0% 0%
4* 8.2hrs 500hrs = 1292.2hrs= 1825
100%
100% Acqu% Mentoring% Consul%
WT * Train ITEWPY
-
8/12/2019 01 Part UniversalBanking Part 1
32/36
TOPSIM
- Universal Banking
Page 30 of 34
7.3.2 Decision: New Branches
Participant Decision:Decide if you would like to open new bank branches, and if so, how many
(standard scenario). Depending on the adjustments made by the trainer new branches might also
be rented.
The bank network can be expanded. New branches are open for business immediately without any
delay. Closing already open branches is not possible due to clauses in the contract.
FIGURES REGARDING BANK BRANCHES
Investment costs for new branches (mEUR) 5.0
Rental costs per year, per branch (mEUR) 0.4
Operating costs per new branch (mEUR) 1.5
The operating costs are incurred every year, not just for new branches but also for already existing
branches as well.
7.4 Logistic Units
The banks logistics units include all investment and operating items required for regular business
operations. Included in this are things such as IT and Online Banking. The current status of thelogistics units is reflected by the automation level index, which can be influence by further invest-
ments in logistics. The previous management did not fully realize the savings potential that could be
obtained when making proper investments in the IT department. With proper investments, a large
savings potential could be realized.
INFORMATION REGARDING LOGISTIC UNITS (FROM PAST PERIODS)
Number of logistics units 1,000
Value of assets (mEUR) 100.0
Depreciation rate (%) 20.0
Annual operating costs (Mio. EUR) 15.0
Automation level (Index) 50
7.4.1 Investments in Logistic
Participant Decision:Decide if you will purchase logistic units (standard-scenario) and if so, how
many. Depending on the adjustments made by the trainer new branches might also be rented.
You may improve your banks automation status by making additional net investments into new
logistics units. Logistics units may be purchased (standard-scenario)or leased.
INFORMATION REGARDING LOGISTIC UNITS
Investment costs per logistics unit ( mEUR) 0.1Leasing cost (Leasing rate & Amortization / %) 28.0
Operating cost per logistics unit (mEUR) 0.015
-
8/12/2019 01 Part UniversalBanking Part 1
33/36
TOPSIM
- Universal Banking
Page 31 of 34
The following information is available regarding the impact of net investments in automation:
NUMBER OF LOGISITC UNITS AUTOMATION LEVEL
400 10
1000 50
1200 66
1400 77
1600 87
1800 94
3000 100
ASSESSMENT OF AUTOMATION
AUTOMATION LEVEL INDEX ASSESSMENT
0 49 Insufficient
50 64 Suffcient
65 79 Good
80 89 Very good90 100 Excellent
7.5 Indexes in the Human Resource and Logistic Business
Productivity
Productivity is the INPUT required to achieve a certain OUTPUT. Increased productivity leads to
improved employee performance and thus cost savings. The main factors influencing productivity
are:
Training Level
Incentive Bonus
Level of automation
The productivity level is determined separately for each business unit. The pertinent information
can be found in the participation report Human Resources.
Training Status
The training status is influenced by the factors such as training time and bonus.
ASSESSMENT OF THE TRAINING LEVEL
TRAINING INDEX ASSESSMENT
0 49 Insufficient
50 64 Suffcient
65 79 Good
80 89 Very good
90 100 Excellent
The training level is determined separately for each business unit. The pertinent information can be
found in the participation report 12.1 Human Resources.
-
8/12/2019 01 Part UniversalBanking Part 1
34/36
-
8/12/2019 01 Part UniversalBanking Part 1
35/36
TOPSIM
- Universal Banking
Page 33 of 34
8 Marketing Business
The term Marketing refers to the banks activities intended for the current and future markets with
the ultimate goal of satisfying customer needs in the long run and achieving competitive advan-
tages. Marketing therefore is concerned with understanding customer needs and meeting those
needs.
In this simulation, four different customer segments exist. Each segment has its own needs and
characteristics which become apparent in the separation of volume in the segments. (see Market
Data Report):
CUSTOMER SEGMENTS ABBREVIATION
Countries & State-owned enterprises States
Large enterprises LE
Small and mid-sized enterprises SME
Private customers Private
8.1 Decision: Marketing
Participant Decision:Regarding marketing decisions, you are able to determine your marketing
strategy. The market strategy determines how much money should be spend on the advertising of
individual products / rating groups and services. To make decision, you will determine a budget (in
mEUR), which you can distribute over the various segments based on priorities.
By assigning priorities you decide how you want to deal with the individual customer groups. Use
whole numbers from 0 to 3 (0, 1, 2, 3)on the decision form to determine your priorities. You may
assign the same values several times.
-
8/12/2019 01 Part UniversalBanking Part 1
36/36
TOPSIM
- Universal Banking
VALUE PRIORITIES
0 Not a priority
1 Slight priority
2 Moderate priority
3 High priority
The advertising budget for money transfer only has an effect on the money market and current
account.
8.2 Sample Advertising Calculation
If you made the following decisions:
Then the advertising budget gets divided up as follows:
States LE SME
Customer rating +++ 1 mEUR 4 mEUR --
Customer rating ++ 3 mEUR - 2 mEUR
Customer rating + -- 6 mEUR
Sample calculation, Customer rating +++/LE:
The advertising budget for customer rating +++ totals 3 million Euro and sum of the priori-
ties is 3. Therefore, 1 million Euros goes to the states and 2 million Euros goes towards
large enterprises (LE).
The advertising budget for customer advertising is 3 million Euros and the sum of the pri-
orites is 3. Therefore 1 million Euros goes towards the customer rating + and 2 million to
customer rating +++.
The advertising budget of 5 million Euros in customer rating does not get allocated, as no priori-
ties were set.
Advertising generally has a positive effect on your publicity and the market share of the individual
product / rating (i.e. the customer groups). Please note the effect of each additionally invested Euro
has less of an effect than the previous one. Also, make sure that the impact of your decisions is