Merchant bank

[1][2] 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 form of share ownership instead of loans.

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.

Christians were strictly forbidden from any kind of lending at interest, since such activities were equated with the sin of usury.

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).

The term bankrupt is a corruption of the Italian banca rotta, or broken bench, which is what happened when someone lost his traders' deposits.

And so the next generation of bankers arose from migrant Jewish merchants in the great wheat-growing areas of Germany and Poland.

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.

In the late 18th century, Protestant merchant families began to move into banking to an increasing degree, especially in trading countries such as the United Kingdom (Barings), Germany (Schroders, Berenbergs) and the Netherlands (Hope & Co., Gülcher & Mulder) At the same time, new types of financial activities broadened the scope of banking far beyond its origins.

In 2016, the Federal Reserve proposed a ban on merchant banking as part of a “take no risk” regulation strategy.