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Compensating Balance

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Compensating balance
An excess balance that is left in a bank to provide indirect compensation for loans extended or services provided.
Compensating Balance
Money from a loan that a borrower keeps in an account with a lender providing some surety that the lender will be repaid. A compensating balance is especially common with corporate loans. It increases the cost of capital to the borrower because he/she is paying interest on more money than he/she is permitted to use.
compensating balance
The funds that a corporate borrower is required to keep on deposit in a financial institution in order to satisfy the terms of a loan agreement. The deposit may be in a checking account, savings account, or certificate of deposit, depending on the nature of the agreement. The net effect of a compensating balance requirement is an increase in the effective cost of the loan because the borrower is unable to use all the funds on which interest is paid.
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Self-selection and the Pricing of Bank Reserves: An analysis of the market for loan commitments and the role of compensating balance requirements.
Approximate maximum likelihood commercial bank loan management model by Asemota, Godwin Norense Osarumwense / Journal of Social Sciences
The form should be as simple as possible, with detailed usage information provided on the form, along with space for the bank to provide its responses in either a direct cost format or a compensating balance format.
Banking due diligence in the new financial world by Evangelisti, Cynthia J.; Lockhart, Kevin C. / Government Finance Review
In 1848 he devised an improved bi-metal compensating balance spring that resulted in a more accurate reading for the setting of longitude.
Heroes worthy of place on Wall of Fame; It's your ECHO by Liverpool Echo (Liverpool, England)
 
 
 
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