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For years, financial services regulation allowed banks–actually encouraged them–to offer short-term credit facilities known as 364-day credit lines. Because banks were not required to maintain capital reserves against these less-than-one-year loans, they could offer them at extremely attractive price points. Even when drawn against, bankers say that the margins for this type of credit have been extremely thin. As a result, 364-day lines are massively popular: Banks use them as loss leaders to attract large corporate customers, and treasurers from companies of all sizes depend on them as economical, readily available standby credit.

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