MERCHANT BANKERS. Private banking firms which do not conduct an ordinary banking business but confine them selves chiefly to acceptance and loan issuing. In most cases they have been evolved out of merchant firms engaged in foreign com mercial business; whose foreign connections and activities caused large amounts of foreign exchange to pass through their hands, and they were at one time the dominant figures in the London exchange market, though they had already left most of this busi ness to smaller firms. Foreign exchange in the period before the World War was largely taken over by the London branches of the foreign banks, from whom it has since been again taken over by the English banks. Foreign trade connections also, by making their name and standing familiar to banks and merchants in all countries, made bills drawn on them universally acceptable and so developed the growth of their activity in acceptance, by which, on payment of a commission, they placed their names at the disposal of less eminent firms, and allowed bills to be drawn on themselves for transactions in which they were not directly concerned.
The foreign connections of such firms and their high prestige also led to their being applied to by foreign Governments, munici palities and other borrowers who desired to raise loans in the Lon don market, and their wealth and high standing in the opinion of the investing public gave them exceptional qualifications for this task. By a gradual evolution they largely abandoned their activi ties as merchants and concentrated them on acceptance and loan issuing. As bankers in the ordinary sense of the word were not until lately admitted on the board of the Bank of England, it was chiefly recruited from the ranks of the merchant bankers. Their acceptance business has lately been subject to keen rivalry on part of the joint stock banks both in England and America (where ac ceptance was first permitted to the national banks by the Federal Reserve Act), but their prestige and long experience as issuing houses are still unrivalled. (See MONEY MARKET.)