Merchant banks originated in the sixteenth century in Europe, when they financed trade. The banking and finance side of their business developed as an adjunct to their trading activities. Merchant banks appeared in Australia in the 1950s and became an important sector of the capital markets, filling the gap left by trading banks which were conservative by habit and subject to heavy government regulation. The Australian merchant banks equate approximately to the US investment banks, having moved towards an investment banking style and away from direct lending. Their activities are generally spread among trading in money, securities and futures markets, organising longer-term finance for corporate clients and assisting clients with foreign-exchange management. Merchant banks also advise on mergers and takeovers; some undertake project financing and investment management, or underwrite short and medium-term corporate debt. By the 1990s most Australian merchant banks had adopted the term investment bank. See also: investment bank.
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