Ottoman Bank
The Ottoman Bank, known from 1863 to 1925 as the Imperial Ottoman Bank and correspondingly referred to by its French acronym BIO, was a bank that played a major role in the financial history of the Ottoman Empire. By the early 20th century, it was the dominant bank in the Ottoman Empire, and one of the largest in the world.
It was founded in 1856 as a British institution chartered in London, and reorganized in 1863 as a French–British venture with head office in Constantinople, on a principle of strict equality between British and French stakeholders. It soon became dominated by French interests, however, primarily because of the greater success of its offerings among French savers than British ones. In its early years, the BIO was principally a lender to the Ottoman government with a monopoly on banknote issuance and other public-interest roles, including all treasury operations of the Ottoman state under an agreement ratified in February 1875 that was however never fully implemented. In the 1890s, it pivoted to a greater emphasis on commercial and investment banking, which it developed with lasting success despite a serious crisis in 1895.
Following World War I, the Banque de Paris et des Pays-Bas took control of the BIO, and renamed it Ottoman Bank in 1925. The bank's remaining public-interest privileges and monopolies were phased out. Its operations outside Turkey were gradually dismantled, a process that was completed in 1975. The Ottoman Bank became Turkish-owned when Garanti Bank purchased it from Paribas in 1996, and was eventually subsumed in 2001 into the Garanti Bank operations and corporate identity, in turn rebranded Garanti BBVA in 2019.
Name
During its heyday between 1863 and 1925 the bank was generally referred to using its French name, banque impériale ottomane, even in English-speaking contexts. This was because French was the international language of the era and especially prominent in the business community among the many languages of the Ottoman Empire. In Turkey after 1925, the bank increasingly operated under its Turkish name Osmanlı Bankası.Background
The Ottoman Empire had traditionally relied on credit from individual financiers known as sarraf, which included not only Muslims but also Armenians, Greeks, Jews, and Levantines. In the early 19th century, prominent sarraf families had coalesced into a community mainly based in the Galata neighborhood of Constantinople, known as the which operated as family businesses. The first formal banking establishment that was not strictly family-controlled was a joint venture between the Ottoman state and two prominent Levantine Galata bankers, Jacques Alléon and Theodore, which took the name of Banque de Constantinople in 1847 but was wound up in 1852. Another project, proposed as the Banque Nationale de Turquie by French entrepreneur Ariste Jacques Trouvé-Chauvel, was considered by the Ottoman government in 1853 but not implemented.During the Crimean War that started in October 1853, France and Great Britain were allied in support of the Ottoman Empire. In 1855, the two nations sent a joint mission to assess Ottoman finances, led by for France and Augustus Edward Hobart-Hampden for the UK, who would later become respectively the first and second General Managers of the Imperial Ottoman Bank in Constantinople.
London-based Ottoman Bank (1856–1863)
In early 1856, Sultan Abdulmejid I called for modern banks to be created in the Empire to improve its financial system and foster economic development. Three main projects emerged in response, respectively promoted by the Rothschild family, the Pereire brothers, and a group of British financiers around Austen Henry Layard and the private bank Glyn, Mills & Co. The Ottoman government opted for the latter, which it identified as better preserving the country's independence from western financiers in comparison with the assertive approaches of the Rothschilds and Pereires. The British project was initially conceived by two businessmen, Peter Pasquali et Stephen Sleight, who had participated earlier in 1856 in the creation of the Bank of Egypt, the first Egyptian joint-stock bank. The project benefited from the support of such influential diplomats as George Villiers, 4th Earl of Clarendon and Stratford Canning, 1st Viscount Stratford de Redcliffe, in contrast to the Pereire initiative that was not much supported by French ambassador Édouard Thouvenel. As was customary at the time for an enterprise that would operate abroad, the British authorities sought approval from the Ottoman government, and once that was confirmed in April 1856, the bank was chartered on as an English entity with seat at 26, Old Broad Street in London. The group of financiers that supported it also included Thomas Charles Bruce, William Richard Drake, Pascoe Du Pré Grenfell, Lachlan Mackintosh Rate, and John Stewart.The Ottoman Bank then sought an issuance privilege from the Ottoman government, but the latter temporized as it preferred a solution that would combine British and French stakeholders, mirroring the Crimean War coalition. As high-ranking official Mehmed Fuad Pasha put it in May 1856 to French Ambassador Thouvenel, the Sublime Porte's wish "was to perpetuate as much as possible the spirit of alliance that saved Turkey during the war, namely providing equal shares to French and English interests." Even as the Ottoman Bank started its operations and opened its first branches, Layard soon understood that a different scheme would be needed to secure the issuance privilege. In a communication to Grand Vizier Mustafa Reşid Pasha in December 1856, he outlined what would eventually be the concept of the still-to-come BIO: a head office in Constantinople, but governance by two parallel committees in London and Paris that would be accountable to the British and French shareholders. Contrary to the desires of the Ottoman authorities, however, Layard insisted that they should not control the bank's management, only conceding a "supervisor" role for a high-ranking Ottoman official. In contrast to Layard, a competing British investor group led by Joseph Paxton presented a project to establish a "Bank of Turkey" with a Governor and Vice Governor who would be both appointed by the Sublime Porte. Paxton's project was endorsed by the Ottoman government in March 1857 but, as Layard had anticipated, it failed to raise investor interest in London. A follow-up effort by some of Paxton's associates under the same name of "Bank of Turkey" started operations in 1858, but had to be placed into liquidation in 1861.
Without the issuance privilege, the Ottoman Bank had modest beginnings with six staff in Constantinople and four in Smyrna as well as a branch office in, then the main building in the Beirut Souks. It also had a branch in Galaţi in Moldavia, complemented by Bucharest in Wallachia from 1861. The bank made some poor credit allocation decisions, suffered from the 1860 civil conflict in Mount Lebanon and a financial crisis in 1861, and met hostility from the Galata bankers.
Early development as quasi-state bank (1863–1881)
Establishment of the Imperial Ottoman Bank
By early 1862, circumstances favored the reconsideration of the Ottoman Bank project. Foreign investors had grown more confident about the reforming intent of the Porte. Mehmed Fuad Pasha had become Grand Vizier and was eager to see a bank emerge with an effective banknote issuance capacity. In line with the insistent position of France's ambassador, he made clear that British–French equality of participation would remain a necessary condition for granting the issuance privilege. In response, the Ottoman bank reached out to the Pereire brothers and their Crédit Mobilier, who assembled a group of distinguished French investors. On in Paris, the British and French negotiators reached an agreement that foresaw the winding up of the Ottoman Bank and transfer of its business to a newly created institution. Negotiations in Constantinople followed in December 1862 between a group of British and French representatives, supported by the two countries' embassies, and the Ottoman authorities. As Layard had suspected in late 1856, and in spite of the replacement of Fuad by Yusuf Kamil Pasha as Grand Vizier, the compromise that was found on the new bank's governance stipulated that its formal head office, board of directors and general manager would be located in Constantinople, but that the latter would be a foreign national and ultimately report to the committees to be formed in London and Paris. The Porte would only appoint a Commissioner with limited powers of oversight. The issuance privilege would be initially granted for a duration of thirty years, and came with a full tax exemption. The bank would execute all financial operations of the Ottoman Treasury in Constantinople, and would be the government's financial agent both domestically and abroad. The bank would thus provide services of a central bank with simultaneous commercial operations, a combination that was not unusual at the time.These arrangements were enshrined in a concession agreement which Kamil signed on together with Fuad, foreign minister Mehmed Emin Âli Pasha, finance minister Mustafa Fazıl Pasha, and chief auditor Ahmed Vefik Pasha. On, the agreement was ratified by firman of Sultan Abdulaziz. On, the Ottoman government registered the new Imperial Ottoman Bank which could then start its operations. That same day in London, the shareholders of the English-chartered Ottoman Bank voted to liquidate it in accordance with the November 1862 agreement, a process that was only finalized in June 1865. Meanwhile, the transfer of the old bank's operations in Constantinople to the new one had been completed on.
The governance concept of the BIO was unique and unprecedented. The two committees in London and Paris were not expected to meet jointly; instead, decisions by one committee became effective once ratified by the other committee. The annual general meetings of its shareholders were held in London. The original committees included: in London, Sir William Clay, James Alexander, John Anderson, Thomas Charles Bruce, George T. Clark, William Richard Drake, Pascoe St Leger Grenfell, Augustus Edward Hobart-Hampden, John W. Larking, Lachlan Mackintosh Rate, and John Stewart; and in Paris, , A. André, Vincent Buffarini, Raffaele de Ferrari, Achille Fould, Frédéric Greininger, Jean–Henri Hottinguer, the Pereire brothers, Alexis Pillet-Will, Casimir Salvador, and. became the first general manager in Constantinople, with Edward Gilbertson as his deputy and the local board being otherwise composed of John Stewart, representing the London and Paris committees, and local bankers Antoine Alléon and Charles Simpson Hanson.