merchant bank

noun
Updated on: 13 Oct 2017

Definition of merchant bank

chiefly British
: a bank that specializes in bankers' acceptances and in underwriting or syndicating equity or bond issues

merchant banker

noun

merchant banking

noun

First Known Use of merchant bank

1620


Financial Definition of MERCHANT BANK

merchant bank

What It Is

A merchant bank is a financial institution that engages in underwriting and business loans, catering primarily to the needs of large enterprises and high net worth individuals. In the British market, the term merchant bank refers to an investment bank.

How It Works

Like investment banks, merchant banks are not depository/retail lender institutions. Rather, merchant banks are intermediaries that provide brokerage, fund-raising, and financial advisory services on a large scale to businesses and a smaller scale to wealthy individuals. For this reason, they often assist in international transactions involving entities such as multinational corporations.

To illustrate the role of a merchant bank, suppose a multinational corporation XYZ is considering the purchase of a smaller company in another country. Company XYZ will likely solicit the services of a merchant bank for advice on how to best approach the acquisition process. In addition, the merchant bank may also assist in the financing of the acquisition, providing underwriting or loan services.

Why It Matters

Merchant banks play a similar role to that of investment banks, but perform on the international level. Consequently, while they assist in raising funds for large companies, they also assist in transactions across national borders.


MERCHANT BANK Defined for English Language Learners

merchant bank

noun

Definition of merchant bank for English Language Learners

  • : a bank for large companies that trade goods in other countries


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