The Design of a Company's Banking System

  • Author(s): BERNELL K. STONE
  • Published: Apr 30, 2012
  • Pages: 373-385
  • DOI: 10.1111/j.1540-6261.1983.tb02242.x

In the past, companies provided virtually all compensation via demand deposit balances. Compensation was settled on a month‐to‐month basis. During the past decade, new compensation opportunities have emerged, namely: 1) the payment of fees, 2) the use of non‐interest bearing time deposits,1 and 3) long‐period balance averaging, especially semi‐annually and annually rather than monthly. While these compensation alternatives can significantly reduce a company's banking costs (while leaving the bank no worse off), they greatly complicate bank system design. They also expand the scope of the problem by creating interdependencies with cash budgeting.

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