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A merchant bank works in one or all of the following fields:


Today, according to the US Federal Deposit Insurance Corporation (acronym FDIC), "the term merchant banking is generally understood to mean negotiated private equity investment by financial institutions in the unregistered securities of either privately or publicly held companies."[1] Today, both commercial banks and investment banks may engage in merchant banking activities.


Merchant banks' ancient and modern purpose is to facilitate and/or finance production and trade of commodities, hence the name "merchant".


Contents

History [link]

Merchant banks are in fact the original banks. These were invented in the Middle Ages by Italian grain merchants. As the Lombardy merchants and bankers grew in stature based on the strength of the Lombard plains cereal crops, many displaced Jews fleeing Spanish persecution were attracted to the trade. They brought with them ancient practices from the Middle and Far East silk routes. Originally intended for the finance of long trading journeys, these methods were applied to finance the production and trading of grain.

In France during the 17th and 18th century, a merchant banker or marchand-banquier was not just considered a trader but also received the status of being an entrepreneur par excellence. Merchant banks in the United Kingdom came into existence in the early 19th century, the oldest being Barings Bank.

The Jews could not hold land in Italy, so they entered the great trading piazzas and halls of Lombardy, alongside the local traders, and set up their benches to trade in crops. They had one great advantage over the locals. Christians were strictly forbidden the sin of usury, defined as lending at interest (Islam makes similar condemnations of usury). The Jewish newcomers, on the other hand, could lend to farmers against crops in the field, a high-risk loan at what would have been considered usurious rates by the Church; but the Jews were not subject to the Church's dictates.[citation needed] In this way they could secure the grain-sale rights against the eventual harvest. They then began to advance payment against the future delivery of grain shipped to distant ports. In both cases they made their profit from the present discount against the future price. This two-handed trade was time-consuming and soon there arose a class of merchants who were trading grain debt instead of grain.

The Jewish trader performed both financing (credit) and underwriting (insurance) functions. Financing took the form of a crop loan at the beginning of the growing season, which allowed a farmer to develop and manufacture (through seeding, growing, weeding, and harvesting) his annual crop. Underwriting in the form of a crop, or commodity, insurance guaranteed the delivery of the crop to its buyer, typically a merchant wholesaler. In addition, traders performed the merchant function by making arrangements to supply the buyer of the crop through alternative sources—grain stores or alternate markets, for instance—in the event of crop failure. He could also keep the farmer (or other commodity producer) in business during a drought or other crop failure, through the issuance of a crop (or commodity) insurance against the hazard of failure of his crop.

Merchant banking progressed from financing trade on one's own behalf to settling trades for others and then to holding deposits for settlement of "billette" or notes written by the people who were still brokering the actual grain. And so the merchant's "benches" (bank is derived from the Italian for bench, banco, as in a counter) in the great grain markets became centers for holding money against a bill (billette, a note, a letter of formal exchange, later a bill of exchange and later still a cheque).

These deposited funds were intended to be held for the settlement of grain trades, but often were used for the bench's own trades in the meantime. The term bankrupt is a corruption of the Italian banca rotta, or broken bench, which is what happened when someone lost his traders' deposits. Being "broke" has the same connotation.

A sensible manner of discounting interest to the depositors against what could be earned by employing their money in the trade of the bench soon developed; in short, selling an "interest" to them in a specific trade, thus overcoming the usury objection. Once again this merely developed what was an ancient method of financing long-distance transport of goods.

The medieval Italian markets were disrupted by wars and in any case were limited by the fractured nature of the Italian states. And so the next generation of bankers arose from migrant Jewish merchants in the great wheat-growing areas of Germany and Poland. Many of these merchants were from the same families who had been part of the development of the banking process in Italy. They also had links with family members who had, centuries before, fled Spain for both Italy and England. As non-agricultural wealth expanded, many families of goldsmiths (another business not prohibited to Jews) also gradually moved into banking. This course of events set the stage for the rise of Jewish family banking firms whose names still resonate today, such as Warburgs and Rothschilds.

The rise of Protestantism, however, freed many European Christians from Rome's dictates against usury. In the late 18th century, Protestant merchant families began to move into banking, especially in trading countries such as the United Kingdom (Barings), Germany (Schroders) and the Netherlands (Hope & Co.) At the same time, new types of financial activities broadened the scope of banking far beyond its origins. The merchant-banking families dealt in everything from underwriting bonds to originating foreign loans. For instance, bullion trading and bond issuance were two of the specialties of the Rothschilds. In 1803, Barings teamed with Hope & Co. to facilitate the Louisiana Purchase.

In the 19th century, the rise of trade and industry in the US led to powerful new private merchant banks, culminating in J.P. Morgan & Co. During the 20th century, however, the financial world began to outgrow the resources of family-owned and other forms of private-equity banking. Corporations came to dominate the banking business. For the same reasons, merchant banking activities became just one area of interest for modern banks.

Here is a list of merchant banks of the past and present:

Modern practices [link]

Known as “accepting and issuing houses” in the U.K. and “investment banks” in the U.S., modern merchant banks offer a wide range of activities, including issue management, portfolio management, credit syndication, acceptance credit, counsel on mergers and acquisitions, insurance, etc.

Of these two classes of merchant banks, the U.S. variant initiates loans and then sells them to investors.[2] Even though some of these companies call themselves "merchant banks," they have few, if any, of the characteristics of former merchant banks.

Further reading [link]

  • Ferris, Paul (1984). Gentlemen of Fortune: The World's Merchant and Investment Bankers. London: Weidenfeld and Nicolson. ISBN 0-297-78380-7. 
  • Wechsberg, Joseph (1966). The Merchant Bankers. Boston: Little, Brown. 
  • O'Sullivan, M.D. (1962). Italian Merchant Bankers in Ireland in the Thirteenth Century: A Study in the Social and Economic History of Medieval Ireland. Dublin: A. Figgis. 
  • Rosenbaum, Eduard (1962). M.M.Warburg & CO, Merchant Bankers of Hamburg; A Survey of the First 140 years, 1798 to 1938. London. 

See also [link]

References [link]

  1. ^ Merchant Banking: Past and Present
  2. ^ Fitch, Thomas P. [1990](2000)Dictionary of Banking Terms: Merchant Bank 4th Edition New York: Barron's Business Guides ISBN 0-7641-1260-0

https://wn.com/Merchant_bank

Medina

Medina (/məˈdnə/; Arabic: المدينة المنورة, al-Madīnah al-Munawwarah, "the radiant city"; or المدينة, al-Madīnah, "the city"), also transliterated as Madīnah, is a city in the Hejaz, and the capital of the Al Madinah Region of Saudi Arabia. The city contains al-Masjid an-Nabawi ("the Prophet's Mosque"), which is the burial place of the Islamic prophet Muhammad, and is the second-holiest city in Islam after Mecca.

Medina was Muhammad's destination after his Hijrah from Mecca, and became the capital of a rapidly increasing Muslim Empire, first under Muhammad's leadership, and then under the first four Rashidun caliphs, Abu Bakr, Umar, Uthman, and Ali. It served as the power base of Islam in its first century where the early Muslim community developed. Medina is home to the three oldest mosques, namely the Quba Mosque, al-Masjid an-Nabawi, and Masjid al-Qiblatayn ("the mosque of the two qiblas"). Muslims believe that the chronologically final surahs of the Quran were revealed to Muhammad in Medina, and are called Medinan surahs in contrast to the earlier Meccan surahs.

Medina (disambiguation)

Medina in Saudi Arabia is the second holiest city in Islam.

Medina, Medinah, or Madinah may also refer to:

Places

  • Medina quarter, the old Arab or non-European quarter of a North African town
  • Antarctica

  • Mount Medina, Graham Land
  • Medina Peaks, Ross Dependency
  • Colombia

  • Medina Province, Cundinamarca
  • Medina, Cundinamarca, a municipality in the Cundinamarca Department
  • Pakistan

  • Madina Colony (New Karachi Town), Karachi, Sindh province
  • Madina Colony (Orangi Town), Karachi, Sindh province
  • Madina Town, Punjab province
  • United Kingdom

  • Medina, Isle of Wight, United Kingdom, a former borough
  • River Medina, a river on the Isle of Wight, United Kingdom
  • United States

  • Medinah, Illinois, an unincorporated community
  • Medinah Country Club, a famous golf club located in the above community
  • Medina, Kansas
  • Medina, Minnesota, a city
  • Medina, New York, a village
  • Medina, North Dakota, a city
  • Medina, Ohio, a city
  • Medina County, Ohio
  • Medina (surname)

    Medina is a surname which may refer to:

  • Alberto Medina Briseño (born 1983), Mexican footballer
  • Alexander Medina Reobasco (born 1978), Uruguayan footballer
  • Anabel Medina Garrigues (born 1982), Spanish tennis player
  • Ann Medina, award-winning journalist
  • Antonio Medina (disambiguation), multiple people
  • Avihu Medina (born 1948), Israeli singer-songwriter
  • Benny Medina (born 1958), African-American music producer, talent manager and record executive
  • Biel Medina Piris (born 1980), Spanish footballer
  • César Medina Lozado (born 1991), Peruvian footballer
  • Chris Medina (born 1983), American singer and American Idol contestant
  • Danilo Medina Sánchez (born 1951), Dominican politician and President of the Dominican Republic since 2012
  • David M. Medina (born 1958), a former Justice of the Texas Supreme Court
  • Debra Medina (born 1962), 2010 Texas gubernatorial candidate
  • Ernest Medina (born 1936), US Army captain who was the commanding officer of the unit responsible for the My Lai Massacre
  • Fernando Medina (born 1973), Spanish fencer
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