What is "merchant bank"

n. A bank which provides financial services for businesses.

n. a credit card processing bank; merchants receive credit for credit card receipts less a processing fee [syn: acquirer]

A merchant bank is a financial institution providing capital to companies in the form of share ownership instead of loans. A merchant bank also provides advisory on corporate matters to the firms in which they invest. In the United Kingdom, the historical term "merchant bank" refers to an investment bank.

Today, according to the U.S. Federal Deposit Insurance Corporation (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." Both commercial banks and investment banks may engage in merchant banking activities. Historically, merchant banks' original 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.