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merchant bank

Definition
BritishA financial institution that specializes in services such as acceptance of bills of exchange, hire purchase orinstallment buying, international trade financing, long-term loans, and management of investment portfolios. Merchant banks also advise on (and invest own funds in)acquisitions, mergers, and takeovers. The nearest USequivalent is an investment bank.

MER CHA N TB

ANKI

NG

HIST ORY .

In lat e 17th .

ande arly 1 8th .

centu ryEur ope. .

the large st .

comp anies of .

the w orld was .

merc hant .

adve nturer s.Sup .

porte dbyw ealth .

ygrou psof peopl .

e and a netwo

rkofo verse as

tradin g p os ts,

theco llecte d larg .

e amou ntsof .

mone y to fi nanc .

e trade acros .

s parts of .

Fo r .thewo rld.

TheE .exam ple.

astIn dia Tradi .

ng Co mpan y sec

ured aRoy al

Warr a nt from

Engla nd. provi .

ding t he .

firmwi th .

officia l rights .

tolucr ative tradin

gactiv ities i nIndi

a. Thisc ompa

ny was the .

foreru nner i ndev .

elopin g the crown .

jewel of the Engli .

.sh Empir e.

The Engli sh .

colon y was starte .

dby what wewo .

u l d to da y c all .

merc hantb anker .

bec ause of the .s.

firm's involv emen .

ne .t infin ancin g.

gotiati ng. .

and imple menti .

ng tra de trans .

action s. The .

coloni esofo ther .

Europ ean c ountri .

eswe re starte .

d in the .

same mann er.For .

theDu .exam ple.

tch merc hant .

adve nturer swer .

e active in .

what areno w .

Indon esia. the Fr .

ench and P ortug .

uese acted simil .

arly in thei r .

respe ctive coloni .

The A .es.

meric an .

coloni es also r .

epres e nt the .

produ ctof merc .

as .hantb ankin g.

evide nced by th .

e activit .

iesof the .

famo us Huds .

on Ba y Co mpan .

y.One does not .

typica lly loo k at .

these count ries' .

econ omic .

devel opme nt as .

havin gbee nfuel .

edby merc hantb .

.anka dvent urers.

the .Howe ver.

coloni es and .

their progr ess .

stem from thebu .

sines s of merc .

accor .hantb anks.

ding t o tod ay's .

acce pted sens .

eofth ewor d.Mer .

chant banks .now .

arein .so cal led.

fact theori ginal .

" b an k s". Thes .

ewer einve nted .

inthe middl eAge .

s by It alian grain .

merc hants .As .

the L om b ardy .

merc hants andb .

anker sgrew instat .

ureon theb ackof .

the L om b ard pl .

ains cerea l .

crops many of .

thedi splac ed Je .

w sw h o had fledp .

ersec ution after .

613 enter ed th .

They .e trade.

broug htwith them .

to the grain trade .

ancie ntpra ctices .

that hadg r own t .

o norm alcy .

in the middl e .

and f ar east. .

along theSi lkRoa .

d. for thefin ance .

of long distan .

cego ods .

trade s. .

The Jews could .

not hold l and .

so th .inItaly .

e y en tered thegr .

eat tradin g piaz .

zas and h allsof .

L om b ardy. along .

side the local .

trader s. and s .

etup theirb ench

es to tra dein c

rops. They

had one .

great adva ntage .

over the .

.locals .

Christ iansw ere .

strictl y forb idden .

the sin ofusu .

The Jewis .ry.

h n ew come rs.on .

.theot her hand.

could lend t o far .

mers again st .

.crops in the field.

a highrisk .

loan atwh atwou .

ld hav ebee ncons .

idere dusur ious .

rates by th e .

Chur ch.bu t did .

notbi nd th e .

In this w ay t .Jews.

hey c ould s ecure .

thegr ain s ale .

rights again st the .

e ve n t ual harve .

st. They thenb .

e g an t o ad vance .

again st .

thede livery .

of gra inship pedto .

distan tports .Inbot .

h cases they .

made their profit .

from the prese .

nt dis count .

again st the future .

This two- .price.

hand ed tra dewa .

s time consu .

ming and s oon t .

here arose of .