Ottoman Bank: a novel institution designed to serve the Ottoman Empire

The Ottoman Bank, known until 1924 as the Imperial Ottoman Bank, was established on 4 February 1863 in Istanbul by the Turkish government in partnership with French and British financiers. The objective was to put an end to the financial crisis which had raged across the Empire in the aftermath of the Crimean War and, more generally, to implement a set of major reforms.

The bank’s structure reflected its Franco-British character, with each nationality having an equal say in the management, through the management committees. It had three headquarters, in London, Paris and Istanbul, and was quoted on the stock exchanges in all three cities. It also had two Boards – a British one and a French one – but no specific nationality. In fact, its legal status was based on a special convention signed with the Ottoman Empire, and subsequently with the Republic of Turkey. The Ottoman Bank operated under this unique status until 1993.

Business development

The bank served simultaneously as the Empire’s central bank, a merchant bank and a commercial bank, and was also the sole currency issuance body for the Ottoman Empire. In 1875, the government broadened its remit, conferring on it responsibility for State budget control and redressing the State’s finances. The bank became Treasurer and chief paying agent for the Empire.

In 1890, with Turkish finances restored to health, the Ottoman Bank began to take on a new dual role: financing the economy and promoting industry, inter alia providing financial backing to railway and mining companies. Last but not least it expanded its foreign network, opening a number of branches in the Orient.

Upheavals in the wake of the First World War

The 1914-18 war and the breakup of the Ottoman Empire considerably changed the role of the Ottoman Bank. Squeezed between opposing parties as it was run under Ottoman legislation but managed according to French and British capital interests, it first lost its right to issue notes, and then its status as State Bank of Turkey when in 1931 the Central Bank of the Republic of Turkey was established.

In 1920, Banque de Paris et des Pays-Bas took a capital stake in the bank and by the 1970s the associated holding company Compagnie Financière de Paris et des Pays-Bas had become the only major shareholder. Refocused on the Turkish market, the Ottoman Bank was sold in 1996 to the Turkish Dogus group, which in 2001 merged with Garanti Bank.