Compensating balance
Compensating balance (also known by its acronym, CB) is a minimum checking account balance that a firm must maintain with a bank to compensate the bank for services rendered or for making a loan; generally equal to 10%–20% of the loans outstanding.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Compensating balance (CB). A minimum checking account balance that a firm must maintain with a bank to compensate the bank for services rendered or for making a loan; generally equal to 10%–20% of the loans outstanding.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
