COMPENSATING BALANCE
(noun)Definitions
There is 1 meaning of the phrase
Compensating Balance.
Compensating Balance - as a noun
A minimum credit balance that a bank may require a borrower to keep on deposit as a condition for granting a loan; a common requirement for establishing a line of credit at a bank
Example: "The compensating balance increases the effective interest rate to the bank since the net amount loaned is reduced but the interest paid is unchanged"
Synonyms (Exact Relations)
offsetting balanceExample Sentences
"The company had to maintain a compensating balance of 10% of their loan amount."
"Banks often require compensating balances as collateral for loans."
"The client was frustrated with the compensating balance requirements imposed by the bank."
"To secure the loan, the business had to open a separate account as a compensating balance."
"The compensating balance helped offset the risk for the lender."
