Issue 47
Year 3
2008-11-25

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Banking and You: the Tribune talks to EBANK

As EBANK now has over one trillion ISK to its name and thousands of customers of one sort of another, along with the ability to directly and deliberately effect numerous primary and secondary markets, they’re a topic worthy of discussion. People can still earn a significantly larger return on their investments if they play the market themselves, but not everybody has the time or energy to do that. EBANK’s planned expansion into bond and stock markets might help bridge that gap, however only time will tell as currently those services are only on the drawing board.

Now, a caveat… the Tribune takes no official stance on EBANK or its members. We do not support, endorse, condone, oppose or monitor their behavior/investing philosophy/business ethics. We make no specific recommendation to our readers other than that people should always perform due diligence before investing in anything and should never invest anything (in EVE or the real world) that they cannot afford to lose.

Those who are interested in EBANK should be sure to check out their website. Questions should most likely be addressed on their forums or the EVE-O forums if you’re willing to wade through that hive of scum and villainy, or EBANK’s preferred means of contact. Any potential investors should download and read the annual financial report. If you’re like me, you’ll have to go to the ‘net to look up a few economics concepts, but EBANK members should also be available to help talk you through it.

Readers should also, if they’re really interested, try to track down some of the controversy that’s gone on in places like Scrapheap-challenge and the EVE-O forums, simply so that they’re aware of the specifics of the allegations. One of our own staffers, for instance, grilled me on how I’d be conducting this interview (they’re so cuuuuuute when they’re new to our stable of writers) by making the following claims: “I hope its not a puff piece, Ebank has real problems, specifically its founder, Ricdic, has flaked out and prematurely ended multiple IPO's in the past, or gotten bored and wanted to move on to new things, and his support has gotten several questionable IPOs off the ground, AND the way the market discussion forums works now if the market "in group" supports your IPO you will get funding, and if Ricdic supports your IPO the market "in group" will support it, and this is especially true because he can use EBANK money to fund IPOS AND he in the past has abused this position to fund IPOs in contravention of the rules of EBANK.”

As one final bit of disclosure, while the Tribune doesn’t take any official stance on EBANK, I’m personally lazy enough with my cash in game that even finding the time to harvest and sell my datacores is a bitch. I doubt I’d ever have the patience required to really play the market, and after all the background research I did to prepare for this interview, I’m now seriously considering investing some of the ISK that just sits in my wallet, doing nothing. I’ve generally found LVV’s posts to be well thought out and he seems like a decent enough guy. I don’t really know much about Ricdic on a personal level other than that I have a powerful compulsion to change his name to Riddick or RiceDick. Ah well. So, for those folks reading along who are predisposed to calling “bias!”, well, now’s the time to get that out of your system.

Of course, the last interview I conducted was with Fried, BRUCE’s long-time leader. Soon after that, the alliance fell to a massive failure cascade and an excellent military campaign carried out by Pandemic Legion and their allies. So if the Curse of the Tribune holds true, expect EBANK to be overrun by Mongol hordes in roughly two months’ time.

For those who’re curious, the interview was conducted by me, FinnAgain.

Anyways, onwards!

FA: So, thank you very much LaVista Vista for taking the time to talk to the Eve Tribune's readers about EBANK, it's good to have you with us. To start with, your position is as one of the bank's auditors. Please describe what that job actually entails as well as what regulatory powers you actually possess?

LVV: Well. The "auditor" position is a fairly new title. We haven't had a need for an official title for it as everybody regulated each other due to our fairly limited amount of business which could be exploited in any way. But with our expanded teller-crew to handle withdrawals around the clock as well as other operations, we wanted to build up a framework to keep everything in check.

It was actually a request by the tellers themselves which spawned it. We all know ISK can be tempting. I'm personally sure that they wouldn't do it. But they wished for somebody to watch them so that they couldn't be accused of anything untrue, should something happen. A central person was needed.

So now I'm working on a framework for the whole of EBANK which will store everybody’s API data and compare it up with our live-data, which only I and our Lead Coder has access to, securing trustworthy data.

FA: Assuming that a problem was detected, what would be your potential courses of action, as an auditor, for either correcting it directly or ensuring that it was corrected swiftly?

LVV: Well, in theory, there's a few things we can do. The first thing, should the circumstances call for it, we can keep them from obtaining more ISK from anybody.

But it all depends on if we find a mistake or if we smell something fishy. In the case of the former, I of course approach the person and just try to figure out what went wrong and make sure that no customers are affected. We all trust each other and understand that we are here to serve the community, so even in the cases where mistakes are made, there's no bad feelings. We have some very dedicated tellers who rarely make mistakes. It has happened once or twice however.

In cases where a teller skims off the top they would be refused access to more funds. That's, at the time, all we could do. But we make sure we always migrate risk by not exposing ourselves to 1 person too much. So a person can't run away with too much ISK

FA: Speaking of which, it's been stated that the assets of EBANK are divided and nobody has access to all of them, preventing anybody from running away with the entirety of the ISK. How is it determined who gets what, in terms of actual raw ISK, and who are the majority ISK holders?

LVV: Well. This can be read about in depth in our annual report. But to summarize, we have thus far worked for a while with a 3x 33% model. We keep 33% of our capital reserved for loans. 33% for any in-game use we might have at the time (We have run a major T2 operation for a while now, but which is being liquidated as our main venture manager is being deployed in the navy). The last 33% is earmarked for different kinds of supporting activities related to those 2. One of the initial things it was used for was manipulating some prices on the market. But it acts as buffer in a sense for our activities, but is very actively used.

And then we of course use the model of fractional reserve banking. We keep between 10 and 20% liquid split between 3 persons. These persons are EBANK Athre, EBANK SentryRaven and EBANK Ricdic. Athre and Sentryraven are our main tellers, EBANK Ricdic is our deposit character. So EBANK Ricdic is exposed to more isk, the the ISK does have a very high velocity through him, so at any time his exposure isn't "huge"

FA: Thanks. You mentioned market manipulation here, and other EBANK members have discussed it in other places. Without giving away any of your trade secrets, please tell our readers about what large scale market manipulation entails and why it's a valid investment strategy.

LVV: Well. One of the things we used to do is to drive up prices of some of the things we produced at the time(You can get a clue about what it was if you look up the Sell Orders forum and notice what kind of T2 BPO's we sell). The basic idea is that by artifically increased demand, prices will rise.

As demand is increased there is more incentive to get into the market. That means we can make a higher profit because we have more customers of one kind or another.

It's a highly liquid way of dealing with ISK. It does have risk, but we have some really smart guys doing it. Not only can the operation, because it's really just trading, yield net profit, but our average markup on our T2 items also increase. It's a win-win situation.

FA: Speaking of the non-contract market in general, EBANK’s recent financial statement showed that a significant portion of your assets are invested in (and in turn come from) industrial production. Yet, EVE is distinct from real world production in that the very nature of reality can change with or without much warning at all. How does EBANK determine what fields to diversify into and how much ISK is tied up at any one moment into specific ships or modules?

LVV: Well, that's a really good question. We took a risk of buying T2 BPO's and other kinds of production which require a large scale operation. We placed our bet on the fact we had more ISK and knowledge than the average corp in the specific industry. By being able to control demand we can play it to our favour. And it frankly worked

But we did diversify. T2 in general could be seen as 1 "market". But we went directly for items which are by definition high-demand items, like milk or butter in real life. They are always in high demand and are thus less prone to crashing for whatever reason.

FA: Speaking of demand and possible crashing.... EBANK has unveiled plans for its creation of a high(er) yield bond market. My understanding is that, in real life, a bond is an investment in a specific entity with that entity’s credit ranking used to determine how likely bond holders are to see a return on their investment.

How would such a process actually work in EVE, and how would EBANK determine what ventures to apply these bonds to? In addition, who would be the ultimate creditor for the bonds? Would EBANK hold them in trust for the corporations/alliances that needed the money, or would EBANK merely serve as a broker?

LVV: Well. Our future plan (Soon™) is that we will be releasing a stock exchange. We will have frameworks and standards which anybody who wants to trade there, needs to have. But in regards to bonds, we will be launching a variety of bonds, both in terms of size, return, length and quantity. It's all investments into EBANK just like if you deposited into a checking account in terms of how it's spending

As for the specifics of how we will "wet" corps who wants to be traded on our stock exchange, I don't have any specific details. I don't think there's any sweet-spot. It all depends on how you perceive things. You can go by the idea that should a corp scam, some sort of security is good. Thus it should be required. But on the other hand it doesn't make sense that if a corp needs to raise ISK, that they should have to put up security, because they don't have enough ISK, right? So no security should be placed, but heavy auditing should take place

So it's something which we will deal with, with the community, once we get there.

FA: Speaking of the markets and investment, there have been some accusations leveled against EBANK, and specifically against Ricdic that perception can inform reality too much. Namely, that Ricdic is "too well respected" and he's unlikely to be gainsaid by many who haunt the market folder. And that this, in turn, could lead to unwise investments if they get Ricdic's seal of approval. Is there any system in place to have a set of checks and balances upon the specific IPO's that EBANK invests in?

LVV: Hm, interesting question. I think the specific "issue" it deals with is really something that's extremely.. Basal in terms of human behavior. People believe in authorities(FOOLS!).

But in general, no. We don't really. Eventually it's all down to risk vs reward. Ricdic is a long-time poster on the market discussion forum and has dealt with his share of IPO's and bonds. You can't always win. We of course diversify, but we have [in the past], if memory serves me right, and will in the future lose some ISK. But in the end we just have to trust each other.

FA: Speaking of scandals, semi-recently an EBANK ("director?") resigned amidst his allegations that Ricdic had improperly abused his authority to invest funds. EBANK responded by claiming that Ricdic had acted completely properly but that it was his critic who had gone off half cocked and didn't have all the facts. Can you fill our readers in on a bit of the 'expanded story', and let us know just how much discretionary power Ricdic has on a daily basis?

LVV: Well, there has been trouble in the past. We expanded rapidly at the time of the "scandal". The loan market was drying out, so we had to look for something new to do. That's when we worked out the 33% splitting, at least as a result of the scandal. We hired Proton Power to take care of our investment together with Ricdic. They bought up a load of T2 BPO's. The problem was that the board had no direct influence on which BPO's. There was a small lapse in communication, but nothing to the extent as being claimed.

We had access to some extensive reports about how exactly how much was being spent. The "surprise" which caused the uproar was obviously how quickly it all passed by. That's how the 33% rule came to life to make sure we didn't "blow" the budget in any way.

So it wasn't Ricdic at fault really. It was simply lack of communication. Just look at CCP, it's not uncommon.

FA: You said that the board “had” no direct influence on which BPO's might be purchased, and that there was a lapse in communication. Does the board, currently, have any influence on specific capital purchases and what refinements have you made to ensure that breaches in communication are minimized?

LVV: Well. The specific reasons for why the board had no influence was simply because we had some offers which we had very little time to actually either take or turn down. Going to the BoD takes time. They didn't have that.

But now the general rule is that loans should take up 33% and any other investment into production/whatever 33%, etc.

We recently came too close to the 33% in our loan department due to an explosion in loans due to Quantum Rise. The board was informed and agreed to let the operation take up more than 33% for the time being.

FA: Within those percentages though, is there any discretionary oversight into how the money is spent/distributed?

LVV: We have no routine for checking how much is invested into each field. The people involved in specific operations always make sure they have the budget for doing what they need to do. So at this point there hasn't been a "need" for it.

FA: Roger. Last question on the controversy front then: Ricdic has (if I recall correctly) publically stated that any possible scams that might happen would be reimbursed by the bank or by Ricdic himself if it was absolutely necessary. Has there been/are there any plans to set up some sort of untouchable 'reserve' in escrow with someone like Chribba, or would any such fixes be out-of-pocket from EBANK's staffers?

LVV: Well. We work with a model where, should we lose ISK on a scam, it's accounted for as an expense. We have a green bottom line, even if we have been scammed and had defaulted loans. Should a teller, for instance, run with 5%, we can cover that up real easy from our reserves which we have build up from our profits.

That's how the EBANK concept was planned out, and has worked so far, even if we have had no "big" expense on our back yet.

FA: Sorry I know I said that was the last quest in that series but I do have a brief follow up: it seems that any scam, even one that 'only' netted 5% of EBANK's considerable ISK stockpile, would have greater repercussions in loss of investor confidence and could trigger a run on the bank. In a case like that, are there any failsafes or would the bank's finances disintegrate wrt some of its clients' investment results?

LVV: A run on the bank is of course the absolute worst-case scenario, which I quite understand. We see people in real life act by no means in a rational manner with the economic crisis. They stop spending during this downturn, amplifying the problems and taking jobs away from people.

We can only really inform people about how EBANK works and why they should feel safe. We have in our terms of service a 48 hour period in which we have to react to a withdrawal request

If a run does occur, then we could be forced to halt any industrial operation and liquify what is possible. But that's all we can do at that point. So the mercy is in the hands of the players.

FA: Roger A bit on the procedural side then. If I understand correctly, currently EBANK offers checking accounts at a 1.5% compounded interest rate and a maximum balance of 3 bil per character account. Am I correct in believing that savings accounts are not currently offered and chances for greater investment won't be around until bonds/the stock market is created?

LVV: We offer 1.54%(That's the compounded value) interest accounts at max 6bill. Savings accounts were disabled a while ago. But we are planning for bonds to offer the same kind of return as our 3% account, if not even more. But that does entail that you deposit your ISK for a longer time. So agree that we keep your ISK for x period of time, but you get more return

Should you want your ISK back, you can trade the bond on our stock-exchange

FA: Sorry I got the ISK cap wrong. Could've sworn it was 3 bil. In any case, one final question: while passive investment might be useful for soldiers being deployed or lazy motherfuckers like myself, active trading can make players a hell of a lot more ISK on their own. What, then, do you see as EBANK's strongest selling point for the average EVE player?

LVV: Well, first of all, the one golden rule of investments: DON'T INVEST WHAT YOU CAN'T AFFORD TO LOSE!

You will gain much better return if you know what you are doing in EBANK. But we have customers who are mission runners and just do it for the fun of doing missions. They make ISK which they don't really have a need for. We can't build on their wealth, and if they ever need it, they can have it inside like ½ day.

If a person gets deployed or is unable to log into EVE for an extended period of time, they can make ISK while they are gone. ISK by definition becomes worth more over time due to deflation in the economy. But gaining interest on ISK that becomes worth more by nature? That's a win-win.

FA: Just to clarify... did you mean "We can't build on their wealth" or "we can" ?

LVV: Oh, we can build on their wealth. At least that makes sense in Danish, I don't know if it conveys the same message in English. But we can build something big and they will benefit from it.

Do you think people who originally invested in Bill Gates benefited from it?

FA: His wife sure did

LVV: I was going to throw out a joke related to the name "Microsoft", but I guess you have minors reading your site





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