The term Merchant bank refers to a financial institution that performs specialised functions and is set up to cater to customers with a large volume of cash transactions. They conduct loan services, financial advisory services, and fundraising services, etc for large corporations and high-net-worth individuals. Unlike retail or commercial banks, merchant banks do not provide financial services to the general public. It is referred to as a wholesale banking institution. Merchant banking started operation in Nigeria in the ’60s.
Functions of Merchant Banks
1. They deal with portfolio management such as the sale and purchase of securities (Issuance of new shares) and other financial management.
2. They provide corporate finance services such as project financing and advisory services.
3. They accept discount bills and make funds available for their customers.
4. They issue credit and provision of medium and long term loans.
5. They accept equipment leasing.