Academic literature on the topic 'Merchant banking'

Banking industry has gone through one of the worst crisis in recent times, and is still recovering from the after-shocks. However, there were a lot of learnings that banks would have taken away from this crisis. One of them is the need for a robust risk management system. The crisis dealt a blow to the banking system, catching them off guard when it came to foreseeing the risk. Banks, in the credit card business, face financial risk in the form of both credit risk and fraud risk. Sharma and Agarwal (2013) proposed a model for predicting the credit risk from the merchants. This paper builds upon their technique to predict the fraud risk posed by the merchants to the banks. Fraud risk is an important aspect of risk management systems, particularly in the credit space. The uncertainty surrounding the receipt of paybacks calls for designing robust risk prediction models. Fraud risk is very different from credit risk because fraud risk does not follow a pattern. It happens suddenly, and may not always have a trend before it happens. This creates a need for separate model for fraud risk prediction. This paper develops a fraud risk prediction model that uses logistic regression technique, deployed using SAS. The setup of the study is the merchant-bank relationship in the credit card industry. The model developed in this paper triggers on a transaction level, and assigns a ‘probability score of default (PF) to each merchant for a possible fraud risk whenever a transaction is done at the merchant. Such a score warns the management in advance of probable future losses on merchant accounts. Banks can rank order merchants based on their PF score, and instead of working on the entire merchant portfolio, they can focus on the relatively riskier set of merchants. The PF model is validated by comparing the actual defaults with those predicted by the model and a good alignment is found between the two. The results show that the model can capture 62 percent frauds in the first decile when the transactions are sorted by the probability of fraud computed by the model.

Based on the private records of a prominent sixteenth-century merchant bank (Salviati of Lyon), this article focuses on an important instrument of trade finance in the early modern period: the fair deposit. While the financial history of deposit banking has often been separated from that of merchant banking, this study demonstrates that during the sixteenth century a specific type of deposit banking emerged at fairs, intrinsically connected to merchant banking and international trade. As analysis of the Salviati archives reveals, the fair deposit was an instrument of both clearing and credit, sustaining the financing of large-scale European trade. Credit mostly derived from international trade and banking, where it was reinjected almost immediately. Investments were stimulated by the numerous advantages offered by the fairs held at Lyon: licit lending at interest, a choice of investments, and the possibility of making purchases and rapid transfers. Loans to local and foreign businessmen nourished the trade of commodities and, above all, the exchange business, conferring on Lyon a crucial position in the European trade and exchange system. This form of deposit banking was closely related to the development of merchant banks that worked mostly on commission, drawing substantial profits from it without becoming specialists or even deposit banks.

In Bangladesh the establishment of merchant bank added value to the stock market which plays a vital role in the progress of economic development. This study tried to analyze the performance of Lanka Bangla Investment Ltd., Prime Finance Capital Management Ltd., IDLC Investment Ltd. and Uttara Finance and Investment Ltd. Seven trend equations have been tested for different activities of the selected merchant banks. It is observed that the selected merchant banks were able to achieve a stable growth of investment in securities, margin loan to clients, brokerage commission, capital gain/loss from securities, portfolio management services, issue management fees, corporate advisory fees and underwriting commission during the period of 2011-2015. Among them the trend equation of investment in securities, margin loan to clients, and corporate advisory fees are positive incase of all the selected merchant banks. Square of correlation coefficient (r2) has also been tested for all trend equations. The r2 of interest income from merchant bank, portfolio management services, settlement and transaction fees and documentation fees, is more than 0.5. It indicates the prospect of merchant banks in Bangladesh is bright.

An analysis of the contribution of regional merchants to the process of forming a system of credit and financial institutions in the territory of Western Transbaikalia is presented in the article. The history of both successful and unsuccessful attempts to create bank ing institutions in the region has been reconstructed on the basis of reporting and officework documentation stored in the funds of the State Archives of the Republic of Buryatia and the Irkutsk Region, the Russian State Historical Archive. It was found that the creation of the regional banking system was based not on the state, but on the private initiative; the key role in the process was played by the merchants. According to the authors, in the process of organizing banks and loan offices, representatives of the merchants were guided not only by making a profit, but envisaged the use of part of the proceeds for charitable purposes. It was revealed that merchant initiatives were caused not only by the desire to expand the opportunities for entrepreneurial activity, but also by the desire to contribute to the development of the native land. It is concluded that the Transbaikal merchants played an important role in the socio-economic development of Western Transbaikalia and became the main driving force in integrating the region’s economy into the all-Russian financial system.

The failure of one of the most prominent German merchant-banking houses of the early sixteenth century, Ambrosius and Hanns, the Brothers Höchstetter, and Associates, serves as the point of departure for an exploration of why early modern merchants failed and what the consequences of failure were. This single example illuminates a variety of issues: state engagement in commerce and finance; legal development of bankruptcy procedures; economic strategies against failure and scandal. It reveals the limits of modern economic theories of economic crisis and development.

The Central European panic of the spring 1931 is often presented as a cause of the sterling crisis of September. But what was the transmission channel? This article explores how the continent's financial troubles affected Britain's banking system. The freeze of Central European assets created a liquidity strain for London merchant banks because they had accepted (guaranteed) the commercial bills of German merchants. I use new balance sheet data to quantify this shock and explore how the liquidity crisis contributed to the sterling crisis. The evidence demonstrates that international contagion was crucial in transmitting the 1931 global financial crisis.