compensating balance or compensatory balance Definition | Business Dictionaries from AllBusiness.com
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Business Definition for: compensating balance or compensatory balance
compensating balance or compensatory balance

average balance required by a bank for holding credit available. The more or less standard requirement for a bank line of credit, for example, is 10% of the line plus an additional 10% of the borrowings. Compensating balances increase the effective rate of interest on borrowings.

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