The Imperial Ottoman Bank

Mavi Boncuk |


The Imperial Ottoman Bank
The building of the Imperial Ottoman Bank, the first branch of the 'Banque Impériale Ottomane', 1864, Selanik/Thessaloniki.
 


In the classical period of the Ottoman Empire, the Treasury, the Mint, moneylenders, pious foundations and guilds executed the Treasury operations, money and credit transactions and the trade in gold and foreign currencies in varying degrees. Until the nineteenth century there were no banks in the modern sense. However there were moneylenders, bankers, creditor pious foundations and the like, which performed all/bank credit transactions of the empire. In 1847 the Ottoman Government allowed Galata Bankers to set up the "Bank of Dersaadet" (otherwise known as Istanbul Bank) as a bank, which assumed the external payments of the Ottoman Empire for the first time.

So it can be stated that banking in the Ottoman Empire originated with the activities of Galata moneychangers. The foundation of the bank was necessitated by the foreign debt of 2,000,000 piastres, for the state asked the bank to lend her 130 million. It may be interesting to note, however, that during its foundation the bank in fact did not have any capital and the drafts it offered gained acceptance based on the personal reputations of the founders. This may have been one of the reasons why the bank failed after staying in business for 5 years, because the Treasury did not pay her debt and the bank had not enough resources to continue its operations. Nevertheless, the success of the bank in holding the exchange rate of Turkish lira constant against the pound sterling made the state consider once more setting up a new bank. In 1856 the "Ottoman Bank" (Bank-i Osmani) was established jointly with French and English capital, and in 1863 partly assumed the functions of contemporary central banking after becoming a state bank under the name of "Imperial Ottoman Bank". The capital of the Bank consisted of 135.000 shares in total, of which 80.000 belonged to The English Group, 50.000 to the French Group, and the remaining 5.000 shares were allocated to Ottomans.

The Imperial Ottoman Bank with its headquarters in London enjoyed the right and monopoly of issuing banknotes. With its branches in Istanbul, Izmir, Beirut and Salonica, the Ottoman Bank certainly played an important role as a commercial institution as well as being a central bank. The bank made advances and lent to the state considerable amount of money, especially after raising its capital to 1.1 billion piastres in 1875, half of which was paid up. Furthermore it supported commercial and industrial establishments by extending credits. From its foundation to the end of the empire the bank acted as intermediary in the money transfers between the people in and out of the country. The bank had also undeniable success in redeeming the paper money, and in stabilizing the shuttered Ottoman economy because of unending wars and influx of refugees pouring into the country following defeats at various fronts.