The ninth agency in the community (building no. 9) is the Commercial Bank Agency. It is the third agency in the community’s Economic Department, which acts as the community’s economic engine.

The Commercial Bank Agency is the community’s banker. In this position, it plays an important part in the community’s economic model.[1] It accepts deposits and leverages wealth by giving business loans to community agencies and participants. The Commercial Bank agency has a monopoly as far as retail and business banking services are concerned, handling all transactional and savings accounts for participants.[2] The bank also plays an important part in regulating the community’s economy, by adjusting the loan-granting process in concert with other banks beyond the community. The agency does this as a way of manipulating economic activity.

As it works to achieve its objective of banking the community, the Commercial Bank Agency performs a number of roles, which are participant-centered. The participants, using the agency’s automated system, perform most of these roles.[3] The system is able to use algorithms and other forms of data analytics to personalize the services it offers participants. In instances where the system is unable to help the participants satisfactorily, they can approach the village presidents for assistance. Besides dealing directly with participants, they also collect information on how the system can be improved, and pass on this data to the agency president. The agency president adjusts the system and sets the agency’s strategy.

The Commercial Bank Agency’s roles are categorized based on whether their performance necessitates coordination with other agencies or not. Core responsibilities are performed with little or no input from other community agencies. Other roles involve other agencies, as described below.

Core Responsibilities

The Commercial Bank Agency’s core responsibilities revolve around its roles as a banker and a driver of economic growth. Some of the agency’s core responsibilities are:

• Facilitate commerce, by enabling the movement of money within the community
• Monitor business loans and recommend remedial action as necessary
• Protect the community economy from external financial shocks
• Leverage deposits
• Act as a bank, handling all savings and checking accounts, enabling the bank to process all transactions between everyone in the community
• Provide financing to Urban Planning Department’s agencies for asset procurement and development

Facilitate commerce

The Commercial Bank Agency enables the flow of funds between different parties in the economy. Using technological tools such as mobile banking apps and internet banking, alongside more traditional banking mechanisms, the agency ensures instantaneous movement of funds, while issuing bank credit lines and loans for the performance of contracts between participants or agencies. The agency holds all participants’ personal and business accounts.[4] It also issues business loans to participants after they are approved by other agencies. Approvals are done after the necessary credit appraisals on applicants. Personal or consumer loans are not offered in the community economic system. The agency also handles other community agencies’ bank accounts.

Monitor businesses’ financial performance

The Commercial Bank Agency’s automated system performs extensive data analysis of the accounts held by participants and agencies. It therefore has an intimate understanding of their account performance – savings, transactional, and loan repayments.[5] This enables the agency to see a general picture of the community economy’s performance, as well as individual participants’ fortunes. The system uses this information to determine the policies it needs to pursue to manipulate economic performance: it can either spur or tone down economic activity.[6]

Leverage wealth

The Commercial Bank Agency facilitates the working of a system through which the deposits and savings of participants are leveraged by a superior factor, compared to what a normal open economy offers. Normally, banks are only able to leverage wealth a few times, as they have to contend with the associated risk of default[7] and lack of sufficient information to make bigger commitments. In the community, however, the Commercial Bank Agency has at its disposal the necessary infrastructure and advantages. It harnesses these advantages to more effectively control the community’s economy. It is also able to adjust its loan granting guidelines (including interest rates) to reflect economic activity, in a more effective manner than normal banks would.

Enhance the financial system’s efficiency

The Commercial Bank Agency works with other agencies and participants to ensure that financial resources are at full employment. The agency, on receiving deposits from investors, acknowledges the deposits, while technically owning the funds deposited. It then uses these funds to make business loans to spur economic growth and control market liquidity. The Commercial Bank Agency also grants business loans to other agencies, as an investment strategy. By giving loans, the bank creates money, as the example below summarizes:

The bank gives a loan to a borrower of $10,000. The bank will have a current asset of the loan advanced, while also monetarizing the loan and crediting the borrower’s account. Thus, the community is $20,000 better off. The bank’s current asset (loan issued) will attract interest, while the borrower will spend the money to better their stewardship, thereby fulfilling the bank’s role as the engine that drives the community economy.

In the community, the bank has enormous financial resources to draw from, since it is a monopoly. It is also able to give the investors (savers) a better return on investment, due to the profits they gain from loans.

Funding assets acquisition

The Commercial Bank Agency provides agencies in the Urban Planning Department with 80% of the money they need to develop or buy assets for use by the community. The bank gives this after the agency in question (for instance Agency 24 – the Assets Management Agency), has raised 20% of the money required from the Capital Fund Agency. The Commercial Bank participates in the credit appraisal process, together with Agency 7 – the Capital Fund agency, so that both agencies are satisfied on the borrowing agency’s repayment ability. The repayment of the loans advanced is obtained from rent income, which is collected by Agency 3 – the Leasing Agency.

Coordinated Responsibilities

The Commercial Bank Agency works with other agencies in the community to better fulfill its mandate as the engine of economic growth.  

Horizontal coordination

The Commercial Bank Agency and the other two agencies in the Community Economic Department work in concert to control economic activity by making it easy or hard to access a loan. When there are too many businesses, due to factors that for some reason are not controlled at the entry level, the three agencies collectively restrict loans and investment.

The Community Economic Department constantly monitors the community economy to identify ways of strengthening it to withstand external shocks, including minimizing overdependence on external financial systems and business relationships or diversifying them to reduce exposure. The three agencies’ automated systems have economic monitoring tools, which work in concert with each other to identify any threats and prepare contingency plans to deal with them. The department then protects the economy by subjecting itself to the usual regulation by the Federal Reserve or other central banks, while additionally setting standards that give it an extra degree of protection from financial meltdowns. The relevant department agency—in this case, the Commercial Bank Agency—can enhance its reserves and institute additional rules on how it conducts business.

Vertical coordination

The agency determines the return on its investment in community buildings and equipment by liaising with Agency 24 – the Asset Management and Agency 3 – Leasing. The latter two agencies build and lease, respectively, community buildings and equipment, with financial help from the Commercial Bank Agency. Depending on its revenue projections, the Commercial Bank Agency advises the Leasing Agency so that the Leasing Agency can decide whether to raise or lower rent rates. In addition, the Commercial Bank Agency liaises with the Auditing Agency, which verifies financial statements before they can be used to grant loans to participants. The Commercial Bank Agency coordinates with Agency 21 – the Underwriting Agency to help minimize the financial risk of investments. The Underwriting Agency provides risk analysis for loan applicants, which the Commercial Bank Agency uses to determine whether to grant loans and the pricing of such loans.

Diagonal coordination

. The Commercial Bank Agency coordinates with the Accounting Agency to train participants on prudent accounting practices, which enhances their chances of accessing loans from the bank. The Commercial Bank Agency liaises with Agency 1 – Human Relations, so that its credit appraisal system can be used in vetting potential participants before their admission into the community.

Conclusion

The Commercial Bank Agency is the engine of economic activity in the community. It achieves this role by adjusting investment, savings, and loans. The agency also works with other agencies within and beyond the Community Economic Department to control the community economy, and protect it from external shocks to which normal economies are extremely vulnerable. The community infrastructure makes the incidence of bad loans very low, while also supplying the Commercial Bank Agency with extensive and accurate information about participants. With this, the agency can make bold investments and therefore exponentially leverage savings and investments up to a hundredfold.

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[1] The financial sector is the cement that binds all components of an economy. Banking is the main piece in the system. Banks act as the engine for economic activity, supplying capital, and avenues for the movement of funds, safe custody of funds. In the community, the Commercial Bank Agency will have these and even more roles – it will leverage deposits by vastly superior factors when compared to contemporary banks. This will be enabled by the community infrastructure, which suppresses risk, and enhances the return on invested funds (Snaije, Bassem. “Can Finance and Credit Enable Economic Growth and Democracy?” Combining Economic and Political Development : The Experience of MENA (2017): 132-143).

[2] One of the advantages of community agencies is that since each of them has a specific duty, with not overlapping of roles, each agency has a virtual monopoly. In the case of the Commercial Bank, the bank has extensive resources from participant’s deposits and loans, enabling it to have near-complete control of the community’s financial sector. This enables it to manipulate economic activity to fit its strategy and objectives. It is also able to lower its long-term marginal profits, thereby providing services at a cheaper rate than would be the case where perfect competition exists. Additionally, monopolizations ensures uniformity of banking services (Carare, P. “Monopoly: Advantages and Disadvantages.” 21 03 2011. SSRN. 07 07 2019)

[3] Automated systems have been adopted in many sectors, due to their reputation for reducing minimizing labor-related costs, accuracy and effectiveness. Automation, far from creating a robotic system that is ill equipped to handle human issues, in fact enhances human-machine interaction, as the personnel engage with the system to find additional ways of improving its applicability. This will be especially important in the community setting, where the system is earmarked to be used as much as possible, to minimize the hours participants, selected as presidents, devote to the community (Madakam, S., R. Holmukhe and D. Jaiswal. “The Future Digital Work Force: Robotic Process Automation (RPA).” Journal of Information Systems and Technology Management 16 (2019): Published online. Electronic).

[4] Banks provide security in the funds transfer process. They also ease the process through which different parties transact business, through checks, cards and wire transfers. Banks also enable international trade, or trade between parties in geographically dispersed regions. In the modern business setting, banks have even more tools that greatly simplify transactions, enabling them to be sent and received instantly, and with minimal inconvenience. The Commercial bank Agency will embrace these technologies, backed up by greater security against third party manipulation, and efficiency, both enabled by blockchain and cloud computing (Upadhyaya, Anil Kumar. Front Cover. Lucknow: Anil Kumar Upadhyaya, 2012. Print).

[5] One defining feature of well-performing banks today is their focus on client relationships. Banks understand that for there to be a fruitful relationship, price is not the only factor, and in many cases is not even considered in decision-making. Banks and clients work to create a relationship based on trust and mutual respect. In the community, the village presidents will have the necessary tools to foster such relationships, through which the Commercial Bank Agency will have a clearer understanding of its clients, including how they can be assisted from a banking perspective Cvijović, Jelena, Milica Kostić-Stanković and Marija Reljić. “Customer relationship management in banking industry: Modern approach.” Industrija 45.3 (2017): 151-165).

[6] Central banks are used as a means of controlling the supply of money in an economy. These are steps through which the bank controls inflation, with an eye on inflation, price stability and economic performance. In the community, the Commercial Bank Agency will play this role. It will have more tools, beyond what is available to contemporary central banks – interest rates. It will be able to adjust the dials (the criteria used to advance loans), to suit its objective to increase or mop up liquidity (IMF. Monetary Policy and Central Banking. factsheet. Washington: IMF, 2017. Electronic).

[7] Commercial banks are faced with high default rates especially in a market where the economy is in decline, or the bank is unable to perform due diligence on their activities. The community will however be protected from this. It will have the tools necessary to avoid high default rates – close interaction at the village level, as well as the presence of other agencies to cater for every need, economic or otherwise of the participant (Arellano, C., Y. Bai and G. Mihalache. “Default risk, sectoral reallocation, and persistent recessions.” International Journal of Economics 112 (2018): 182-199).