Business, Legal & Accounting Glossary
A moral, rather than a contractual, commitment by a bank to provide a loan to a borrower up to a stated total amount over a stated period, typically one year.
Because a bank line, also known as a line of credit, is not a legal commitment, it is not usual for a commitment fee to be charged. However, it is often necessary to keep compensating balances on deposit, typically 10% of the bank line plus an additional 10% of actual borrowings. Where customers are officially notified in respect of a line, the term is advised line or confirmed line. In cases where the bank sets an internal guide and the customer is not notified the term is guidance line.
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This glossary post was last updated: 26th April, 2020 | 5 Views.