The required compensating balance is usually computed as a
A) percentage of the customer's loans outstanding.
B) factor of accounts receivable.
C) percentage of the bank's commitments toward future loans to the customer.
D) percentage of the customer's loans outstanding or percentage of the bank's commitments toward future loans to the customer.

Question

Quizplus · Accepted Answer

The required compensating balance can be computed either as a percentage of the customer's loans outstanding or as a percentage of the bank's commitments toward future loans to the customer. This gives the bank some assurance that the customer will use their services more frequently, while also allowing the customer to maintain some level of control over their financing needs.

The Required Compensating Balance Is Usually Computed as a