Compensating balances are a way for banks to recover the cost of corporate services provided, but not directly charged.

Question

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Compensating balances are used by banks to recover costs for corporate services provided, such as loans or lines of credit, that may not have direct fees associated with them. The borrower is required to maintain a minimum balance in their account as a form of collateral to offset the cost of the services provided.

Compensating Balances Are a Way for Banks to Recover the Cost