COMPENSATING BALANCES Definition

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COMPENSATING BALANCES are the funds a business might be required to keep in a deposit or reserve account to help offset what the bank perceives as risk. The lender might require that an amount based on the business' average account balance or a certain percentage of the face value of the loan be maintained in a deposit account.

Learn new Accounting Terms

FX ACCOUNT (Foreign Exchange Account) is a trading account usually based in foreign currencies.

OFF-BALANCE SHEET is not fully documented accounting transactions that can potentially incur risks of loss that are not fully transparent to investors.

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