Merchant Banks

Merchant Banks term is very widely used in EuropeThe solution was found to be the accepting of these
and refers to their origin as mercantile housestraders' bills by one of the older well-established firms,
specializing in the export of British products,for a consideration in the form of commission.
particularly cotton cloth, and the import of anyGradually the merchant became a banker specializing
products of the countries where they werein the accepting of bills for other merchants.
established. This involved remitting money from oneAfterwards, merchant banks (bankers) started issuing
country to another, and the bill of exchange onforeign bonds for overseas governments who lacked
London becomes the means of financing the importcapital. The issue of these bonds was only possible if
and export trades. The merchants concernedthe names of famous houses appeared in association
became well known as absolutely reliable firms whosewith the issue. The merchant banks (bankers)
signature on a bill would make it readily discountablearranged for a quotation on the London Stock
on the money market.Exchange and handled the issues which were
The change to banking developed as the number ofsubscribed for by British and overseas investors.
firms trading with overseas territories increased. ManyToday the issue of "Eurocurrency" and
of these new firms found that they respect and"Petrocurrency" bonds is again becoming an important
trust enjoyed by the well-established houses, so thatactivity for merchant banks.
their bills of exchange were less readily discounted.