Compensating Balances

Multiple Choice

Compensating balances

A) are a particular form of collateral commonly required on commercial loans.
B) are a required minimum amount of funds that a borrower (i.e., a firm receiving a loan) must keep in a checking account at the bank.
C) allow banks to monitor firms' check payment practices, which can yield information about their borrowers' financial conditions.
D) are all of the above.