Ottoman Bank - History

History

On February 4, 1863, seven years after its establishment, the shareholders of the Ottoman Bank signed a contract to form the Imperial Ottoman Bank. Sultan Abdülâziz, who expected to improve his country's economy, which was in a state of financial crisis after the Crimean War, ratified the contract immediately.

Tanzimat era's principal renovations in the financial field were the re-establishment of the currency and the foundation of the Ottoman Bank. The Ottoman Bank provided the Treasury with the necessary advances, played an intermediary role during the Ottoman public debt and acted as a bank of issue, principal function of state banks.

On February 18, 1875, the bank was authorized to control the budget, the expenditures and incomes of the state, to ensure reform and control the precarious Ottoman financial situation. The character of the Ottoman Bank as a state bank was fully reaffirmed by extending its right of issue for 20 years and conferring on it the role of Treasurer of the Empire.

The bank continued to help the Ottoman state through providing it several credits after the Balkan Wars, became member of the Council of the Public Debt, and assumed the tobacco monopoly in a limited company. Following the re-establishment of Empire's credit standing, the placing of Turkish loans abroad became possible around 1886. Enabled by the reduction of commitments towards the Treasury around 1890, following the improvement of public finances, the Ottoman Bank undertook a double activity of financing the Turkish economy and promoting other business.

Within the frame of merchant banking activities, it was mainly involved with public works and railways, the Beirut Port, the railway line Beirut-Damascus and its later extension to Homs, Hamah and Aleppo. The Bank's financial support continued to some other railway projects including the line Constantinople-Salonica, Smyrna-Kasaba (1892) and the Baghdad Railway (1903). In 1896, the Bank played a major role in the establishment of the Ereğli coal mining company on the Black Sea shore. In August 1896, the bank was the subject of a seizure by Armenian Revolutionaries intent on bringing international attention to mistreatment of Armenians in the Ottoman Empire.

The declaration of World War I damaged the Bank, since it lost credibility with the Ottoman government because of its British and French shareholders, and on the other hand the British and French governments considered the bank as an institution belonging to the enemy. This caused particular problems in Cyprus, an Ottoman province administered by Britain up until the First World War, when the island was annexed in response to the Turks siding with the Axis powers. After an initial run on the bank in 1914 left the local operation of the bank with less than £4,000 sterling in its vaults, and no means of replenishing its reserves from the head office in Constantinople, the bank was briefly closed by the British authorities and then allowed to re-open effectively as a separate semi-state company. In part this compromise seems to have been reached as the British authorities in Cyprus had themselves deposited their entire funds in the bank in Cyprus, some £40,000 sterling, which would have been lost had the bank been forced to close. But, with the exception of Cyprus, during this time, the British and French executives of the bank left their posts, and the Ottoman Government abolished the privilege of issuing banknotes. However, its other activities continued.

After the War of Independence and the proclamation of the Republic of Turkey, the regulation of the relations with the new state was set up on March 10, 1924. The name of the Bank was changed from the Imperial Ottoman Bank back to the Ottoman Bank. The Bank's role as a state bank remained, however it was extended on a temporary basis due to the Turkish government's intention to establish its own Central Bank, which was realized in 1931.

During the period after World War I, most of the branches had to be closed, while new branches were established in the Near East between 1920-1930 to serve British interests.

In 1933, the Ottoman Bank became a commercial bank, and finally in 1952 it turned into a private institution.

Following the Suez Canal crisis in 1956, Egyptian government nationalized all the five branches in the country. The Egyptian government established Bank Al-Goumhourieh to take over the Egyptian operations of Ionian Bank and the Ottoman Bank in the wake of the Suez Canal War. In 1958, the Bank extended its network to East African countries such as Kenya, Uganda, Tanzania and Rhodesia (now Zimbabwe) to meet the demand of its shareholders.

With the increasing trend of transferring foreign-owned banking business to local ownership in many countries, in 1969 the Bank sold its branches in London, Cyprus, Sudan, Jordan, East Africa, the Emirates and Rhodesia to National and Grindlays Bank. The branches in France and Switzerland it regrouped in a separate company called Banque Ottomane, which Grindlays Bank later bought.

In 1996, the Ottoman Bank was sold to Doğuş Group, and from then on its commercial banking activity focused mainly on Turkey. On July 31, 2001, it merged with Körfez Bankasi. On December 21, 2001, it was incorporated in its principal shareholder, Garanti Bank. At the time of its merger, the Ottoman Bank had a network of 58 branches and around 1,400 personnel.