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.
An offshore bank is a
bank located outside the country of residence of the depositor, typically in a
low-tax jurisdiction (or tax haven) that provides financial and legal
advantages. These advantages typically include:
·
greater privacy
(see also bank secrecy, a principle born with the 1934 Swiss Banking Act)
·
little or no
taxation (i.e. tax havens)
· easy access to deposits (at least in terms of regulation)
·
protection
against local, political, or financial instability