X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

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.

But the glory days of the 364-day line are almost certainly over, according to banking experts, thanks to the adoption of the Basel II banking accord and its requirement that banks must start setting aside capital against these short-term loans in 2007. That may seem a distant prospect, but banks are already implementing the necessary systems changes. Experts warn that companies need to think about the consequences now, especially because banks may seek to pass on costs through the “increased cost” clauses that most loan agreements contain–a potential battleground that is already sparking debate between lenders and borrowers.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.

Already have an account?

 

Treasury & Risk

Join Treasury & Risk

Don’t miss crucial treasury and finance news along with in-depth analysis and insights you need to make informed treasury decisions. Join Treasury & Risk now!

  • Free unlimited access to Treasury & Risk including case studies with corporate innovators, informative newsletters, educational webcasts, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM publications including PropertyCasualty360.com and Law.com.

Already have an account? Sign In Now
Join Treasury & Risk

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.