What is a merchant bank?
Rather than dealing with the public, merchant banks provide commercial loans, underwriting and investment for companies and wealthy individuals. They manage portfolios and deal with international transactions, as well as offering financial advice on issues such as company acquisition and takeovers.
Where have you heard about merchant banks?
You may remember the dramatic collapse of long-established British merchant bank, Barings, in 1995 thanks to the activities of rogue trader Nick Leeson. Merchant banks also hit the news during the financial crisis in 2008 when there was discussion over whether some investment banks had misled clients.
What you need to know about merchant banks.
Merchant banks deal with complex aspects of banking, rather than the day to day, with some specialising in specific sectors. They got their name because historically they supported production and trade.
Although the term is synonymous with investment banks in the UK, in the US there's a fine distinction between the two, with merchant banks tending to work on international transactions and with smaller companies, while investment banks deal with IPOs.