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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
The balance required to be kept on deposit at a bank by a borrower when taking out a loan. Should the borrower fail to repay the loan either in full or in part, this balance would be forfeited. Compensating balances are typically 10% of the loan amount.
Similar MatchesCompensating variationCompensating variation
An amount of money that just compensates a person, group, or whole economy, for the welfare effects of a change in the economy, thus providing a monetary measure of that change in welfare. Same as willingness to pay. Contrasts with equivalent variation.
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