In modern British parlance, it is an investment bank. However, a merchant bank initiated hundreds of years back as a bank whose main business was confined to commercial loans and investment. Merchant banks were a precursor of modern banks and evolved from medieval merchants who mainly traded in commodities and other products.

As an investment bank, this bank provides a host of specialized services such as underwriting, loan services, financial advising, and fundraising services for institutional clients/ investors and wealthy individuals. A merchant bank commits its own funds for investment banking deals. For example, it may acquire equity interest or creditor position in another institution.