Because banks play an important role in financial stability and the economy of a country, most jurisdictions exercise a high degree of regulation over banks. Most countries have institutionalized a system known as fractional reserve banking, under which banks hold liquid assets equal to only a portion of their current liabilities. In addition to other regulations intended to ensure liquidity, banks are generally subject to minimum capital requirements based on an international set of capital standards, the Basel Accords.
The concept of banking may have begun in the times of ancient Assyria and Babylonia with merchants offering loans of grain as collateral within a barter system. Lenders in ancient Greece and during the Roman Empire added two important innovations: they accepted deposits and changed money. Archaeology from this period in Iran, ancient China and India also shows evidence of money lending.
Recently, as banks have been faced with pressure from fintechs, new and additional business models have been suggested such as freemium, monetisation of data, white-labeling of banking and payment applications, or the cross-selling of complementary products.
The history of merchant banks can be traced back to Italy in the late Medieval times as well to France in the 17th and 18th centuries. Merchant banks began operating as organized money markets consisting of merchants financing the transactions of other merchants. French merchant Marchand Banquer invested all his profits by integrating the banking business into his merchant activities and became a merchant banker.
However, with the growth of the financial world, corporations overshadowed family-owned businesses in the banking business. The corporations included merchant banking as one of their areas of interest, a characteristic that banks hold until today.
A merchant bank is a financial institution that provides banking and financial solutions to High Net-worth Individuals (HNIs) and large corporations. They provide services like underwriting, fundraising, issue management, loan syndication, portfolio management, and financial advice.
Some of the oldest banks offering merchant banking services include Citi Bank and JP Morgan. Other institutions include Bank of America, Merrill Lynch, Goldman Sachs, Morgan Stanley, Barclays Capital, Credit Suisse, Deutsche Bank AG, Evercore, Jefferies International Ltd, Lazard, RBC Capital Markets, SG CIB, Stifel, USBank, and UBS Investment Bank. 2b1af7f3a8