COMPENSATING-BALANCE REQUIREMENTS: THE RESULTS OF A SURVEY.

The article discusses the compensatory balance requirements and the importance of these in a commercial banking environment and how different banks build their practices around the strictures. It is found that the requirements are most often found in large banks and for borrowers of sizable loans. It is found that banks of different sizes and locations administer such requirements differently and these can be explained through loan portfolio management and the degree of diversification in the banks' investments.