Merchant bank

A merchant bank is historically a bank dealing in commercial loans and investment. In modern British usage it is the same as an investment bank. Merchant banks were the first modern banks and evolved from medieval merchants who traded in commodities, particularly cloth merchants. Historically, merchant banks' purpose was to facilitate and/or finance production and trade of commodities, hence the name "merchant". Few banks today restrict their activities to such a narrow scope. In modern usage in the United States, the term additionally has taken on a more narrow meaning, and refers to a financial institution providing capital to companies in the form of share ownership instead of loans. A merchant bank also provides advice on corporate matters to the firms in which they invest. History of banking Merchant banks were the first modern banks. They emerged in the Middle Ages from the Italian grain and cloth merchants community and started to develop in the 11th century during the large European fair of St. Giles (England), then at the Champagne fairs (France). 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. The Florentine merchant banking community was exceptionally active and propagated new finance practices all over Europe. Both Jews and Florentine merchants perfected ancient practices used in the Middle East trade routes and the Far East silk routes. Originally intended for the finance of long trading journeys, these methods were applied to finance the medieval Commercial Revolution. Jews 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 from any kind of lending at interest, since such activities were equated with the sin of usury. Jewish law disallowed usury among Jews, but not when the borrower was Gentile.