Ottoman Bank

Former bank in the Ottoman Empire, then Turkey

The Ottoman Bank (Osmanlı Bankası), 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. In Turkey after 1925, the bank increasingly operated under its Turkish name Osmanlı Bankası.

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 (long established, mostly Catholic or Jewish families of western European descent). In the early 19th century, prominent sarraf families had coalesced into a community mainly based in the Galata neighborhood of Constantinople, known as the Galata bankerleri 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 Leventine Galata bankers, Jacques Alléon and Theodore de, 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.

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 (in London, Paris and Vienna), the Pereire brothers (in Paris), 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 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. Without the issuance privilege, the Ottoman Bank had modest beginnings with six staff in Constantinople (12 in 1858) and four in Smyrna as well as a branch office in خان أنطون بك, 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. 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 BIO was not entirely oblivious of the broader financing needs of the Ottoman economy, however. As a complement to its own activity of lending to the Imperial government and international financial transactions, it sponsored in 1864 the creation of a separate bank that would focus on lending to local businessmen and local government. That "younger sister", named the Société Générale de l'Empire Ottoman (SGEO, "General Company of the Ottoman Empire"), had as initial shareholders the BIO itself together with a number of Galata bankers such as Aristide de, the Camondo family bank, Boghos Mısırlıoğlu, the Zafiropoulo & Zafiri partnership, and Christakis Zografos, as well as international partners Bischoffheim & Goldschmidt (Paris and London), Frühling & Göschen (London and Leipzig), Oppenheim, Alberti et Cie (Paris), Augustus Ralli (Marseille), Stern Brothers (London), and de (Frankfurt). After a few years, however, the relations within that group deteriorated, and by the 1870s the BIO had cut most of its exposure to the SGEO, at the time when the BIO was starting to develop its own commercial and retail banking operations throughout the Empire. The Crédit Général Ottoman was a major underwriter of Ottoman treasury bonds, but ceased to operate in 1899. and the Austro Turkish Bank (, sometimes Société de crédit austro turque) in 1872. the Austro Ottoman Bank was merged into the BIO in 1874.

Starting with the Herzegovina uprising in July 1875, the Great Eastern Crisis resulted in renewed financial stress. On , grand vizier Mahmud Nedim Pasha unilaterally decided and announced a change in the terms of reimbursement of the recent loans, without consulting the BIO, The Empire's security situation kept deteriorating with the April Uprising of 1876 in Bulgaria and the declaration of Serbian–Ottoman War in June 1876, as well as the successive depositions of Sultan Abdulaziz on and of his nephew and short lived successor Murad V on In 1876 and 1877, the authorities fueled inflation by issuing new Ottoman liras in the form of paper currency or kaime, as they had done during the Crimean War, which were later repurchased at a depreciated rate. On , Russia in turn declared war on the Ottoman empire. Following protracted negotiations in London, the BIO led a new loan backed by the tribute from the Khedivate of Egypt, which was partly released from its pledging as collateral for prior Ottoman borrowing in 1854 and 1871, but its placement failed in December 1877 following Ottoman military setbacks at the Battle of Kars and the Siege of Plevna. During that turbulent period, the BIO reduced its activity and cost base and suspended dividends, while its claims on the Ottoman state ballooned. The BIO was involved in early considerations of a railway from Haydarpaşa railway station, on the Asian side of Constantinople, to Anatolia and ultimately to Baghdad, which would later be known as part of the Berlin–Baghdad railway. In 1888, it formed a group of investors to this effect together with Bleichröder and the Disconto Gesellschaft in Berlin, but Deutsche Bank won a competing concession later that year and the BIO redirected its focus to railway projects in the Levant and Syria. In 1906, the BIO relocated its Beirut branch to a new building on the port's waterfront. In May 1899 in Berlin, the BIO and the Deutsche Bank agreed on a joint approach for the railway project toward Baghdad, which would unfold and unravel in subsequent years. On in Paris, the two institutions agreed to form a financing syndicate, an operating company and a construction company to execute the project. On , a final act of concession was signed in Constantinople. But the project was conditional on attracting an international set of investors including a group from the UK, which failed to materialized in April 1903 because of negative British public perceptions about participation in a German led endeavor. Through negotiations in Berlin in June, the BIO and Deutsche Bank produced a revised concept that maintained the appearance of equality between France and Germany, but given the tense relationship between the two countries, that was refused by both governments later in June. The railway to Baghdad ended up dominated by German and affiliated interests, with only limited participation by the BIO. The BIO participated in the construction of the railway from Constantinople to Salonica from 1892 to 1896 (the greater part of which later became the Thessaloniki–Alexandroupoli railway), but with no large financial commitment as it correctly anticipated that the line would not be profitable. From 1894 to 1897 it led the development of the railway from Smyrna to Afyonkarahisar, known as Smyrne Cassaba & Prolongements. and the Brussels registered Société Financière d'Orient in 1896, which was actually managed from Paris.

Simultaneously as he led the financial relationship with the Ottoman government in the early 1890s, Edgar Vincent initiated a program of opening new branch offices, particularly in Anatolia and beyond, as previously considered in 1865 and 1874 but never before implemented at scale. The BIO restarted a network in Bulgaria beyond the branch in Philippopoli that had opened in 1878, opening in Sofia in 1890 and (once again) in Ruse in 1892. In 1903, the BIO was again the target of an action intended to shock Western European public opinion, this time by Bulgarian nationalists participating in the Macedonian Struggle. The Boatmen of Thessaloniki, an anarchist group, bombed the bank's branch in Salonica and adjacent buildings on , killing a night guard, as part of a two day campaign of terrorist attacks that also damaged railways and a French passenger ship. The bank was able to reopen on a nearby location on From 1904 on, the BIO was able to accelerate the expansion of its branch network, including in Egypt. One of the BIO's aims in opening new branches was to preempt competition from new peers such as the Banque de Salonique in Macedonia. Unlike in the past, the new branches quickly generated profits, and the BIO's commercial banking operations became increasingly dominant in its overall activity. Some of the bank's branches hosted other public services. For example, the BIO branch in the eastern Anatolian city of Van also served as the local office of the Ottoman Tobacco Company, the Ottoman Public Debt Administration, and the

In Constantinople, the BIO declined to further finance the government, and unilaterally renounced its issuance privilege, leaving the Ottoman authorities to issue paper money as they had already done in the late 1870s. On , with no hope of receiving more credit from the BIO, Talaat Bey requested the replacement of the three French senior executives (namely Arthur Nias, Louis Steeg, and Isidore Dupuis) with their most senior colleagues who were Ottoman nationals, namely Georges Cartali, Marius Hanemoglou, and Berch Kerestejian. Nias instructed the latter to act as a collegial leadership, before traveling back to France together with Dupuis and Steeg. The other British, French, Italian and Russian employees of the BIO were generally allowed to keep their jobs. A later attempt by Talaat Bey to nationalize the BIO failed in July 1915, in part due to opposition from Deutsche Bank with which the BIO had a longstanding partnership, and to advocacy by Mehmed Cavid that the BIO's survival as a credible institution was in the Ottoman state's longer term interest. The ways the war affected individual branches were extremely diverse. In eastern Anatolia and elsewhere, the BIO's leadership led by Cartali managed to obtain exemptions for many of its Armenian staff from the Armenian genocide. The BIO's staff in Syria and Mesopotamia were also able to provide some financial services to deported Armenians despite the hostile environment. Throughout the war, the BIO kept processing the local financial transactions of the Ottoman government through its unparalleled network of branches, which made it easier to secure protection for its staff. It mostly refrained, however, from new lending business to either the government or the private sector, which led to a considerable erosion of its market share. In the Levant, following the secret Sykes–Picot Agreement of 1916, the French authorities pressured the BIO to transform its branches in the territories under French influence into a separate subsidiary. On , the BIO consequently sponsored the establishment of a new Banque de Syrie, of which it initially held 94.45 percent ownership and which opened operations in Marseille and Beirut in April 1919. The situation in the region remained uncertain, however, until the French authorities expelled Emir Faisal from Syria in July 1920. Subsequently in 1921, the Banque de Syrie acquired from the BIO all its branches in the region, while the BIO sold some of its shares to local business leaders. In the BIO's core area of operations, the Turkish War of Independence disrupted its business until the return of peace with the Treaty of Lausanne in July 1923. During the war, the BIO endeavored to keep a position of neutrality and instructed its branches to cooperate with whichever forces were in control of the territory, while temporarily closing them if the local conditions made business entirely impossible. Two other conventions, respectively in 1933 and 1952, led to the full normalization of the Ottoman Bank's status as a commercial bank. In 1947, it redeemed its last circulating banknotes (all issued before 1914) and reimbursed them in gold at par, an achievement unmatched by any other note issuing bank since the beginning of World War I. As for the British group, the bank further opened branches in Egypt (El Geneifa in the Sinai in 1940, Port Tewfik in 1941, El Mahalla El Kubra in 1942, Fayoum and Tanta in 1947), Cyprus (Kyrenia in 1943, Lefka and Morphou in 1946), as well as in West Jerusalem (1947), Erbil (1948), Khartoum and Port Sudan (1949). In 1956, Gamal Abdel Nasser nationalized all Ottoman Bank operations in Egypt, and transferred them to the purposed created Bank Al Goumhourieh together with those of Ionian Bank. The Ottoman Bank nevertheless kept opening new branches, in Qatar (1956), Abu Dhabi (1962), and Muscat (1969). In 1969, the BPPB sold all these remaining operations of the London led group to National and Grindlays Bank. In 1975, Grindlays also purchased the Paris commercial branch and affiliated operations in Switzerland, which were renamed Grindlays Banque France.

In 1996, Paribas ceded its control of the Ottoman Bank to Garanti Bank, by then a fully owned subsidiary of the Doğuş Group. On , Garanti merged the Ottoman Bank with Birleşik Türk Körfez Bankası, and on , integrated it fully into its own operations. This led to the disappearance of the Ottoman Bank brand name from all remaining branches. At the time of its merger, the Ottoman Bank had a network of 58 branches and around 1,400 personnel. Most of these branches have been maintained as branches of Garanti Bank since the merger.

The Ottoman Bank was set up as an institution in which people from multiple nationalities would work, even though the nationality of its most senior executives was the matter of numerous negotiations over the years. The General Manager in Constantinople and their deputy were British or French, even though during World War I the BIO was administered by Ottomans of Armenian and Greek ethnicity as British and French nationals had to leave the country at war. The top executives and most of the branch managers were Europeans. Many mid level officers and some branch managers were non Muslim Ottomans of Greek, Armenian, Jewish and Arab Christian background. The bottom of the hierarchy was mostly Muslim Ottomans performing services as clerks, couriers, guards and doorkeepers. Compared to the proportion of the different population of the empire, the number of the non Muslim personnel was comparatively high, partly reflecting the fact that non Muslims had better access to western language skills, accounting and banking education, and culturally western orientation until the forming of the Republic of Turkey.

The Ottoman Bank (from 1856) and then the BIO (from 1863) were initially established on the top floor of Saint Pierre Han, a commercial facility that was a dependency of the Church of Saints Peter and Paul in Galata. In the late 1880s, the BIO decided to commission a new headquarters building slightly downhill on Voyvoda Street, now Bankalar Caddesi in Karaköy, which would also serve as headquarters for the Ottoman Tobacco Company in which the BIO was the main investor. Architect Alexander Vallaury designed the building for that purpose, with an east–west division between the two entities and separate street entrances (the BIO on No.11 and the Tobacco Régie on No.13); and a north–south stylistic division between the Western looking street front and the neo Ottoman, asymmetric rear façade that rose prominently above the Golden Horn. Thus, Vallaury's design embodied the BIO's unique identity as a bridge between Western European capitalism and Ottoman statehood. The building was inaugurated on and was kept in use by the Ottoman Bank until 1999. From 1999 to 2009, it housed the Karaköy branch of Garanti Bank and its area directorates, as well as the Ottoman Bank Archives and Research Centre. It was then closed for refurbishment and reopened in November 2011 as the Galata site of SALT, a cultural institution that is funded by Garanti Bank, complementing SALT's other Istanbul site on İstiklal Avenue, formerly Platform Garanti Contemporary Art Center. SALT operates the Ottoman Bank Museum in the building together with a café, a bookstore, an auditorium, temporary exhibition spaces, a public library, and an archive that is open to the public (Açık Arşiv). The twin neighboring building, on Bankalar Caddesi 13, has hosted the Tobacco Monopoly Administration (succeeding the Régie) from 1925 to 1934, and since 1934 has been the Istanbul branch of the Central Bank of the Republic of Turkey. The Ottoman Bank Museum was initially opened in the building's basement and expanded into the upper floors in 2017. The basement includes four bank vaults, the largest of which is two storied and has been repurposed to display the banknotes and silver coins issued between 1863 and 1914 together with the story, design, registration and samples of each.

At the very outset in 1856, the BIO established itself in existing commercial malls or caravanserais, namely Saint Pierre Han in Galata, خان أنطون بك in Beirut, and Baltazzi Han in Smyrna. In 1863, it purchased a prominent mansion from Levantine businessman Jake Abbott for its new branch in Salonica which would be destroyed by terror attack in 1903. In later years, the BIO would usually rent an existing space when opening a new branch, and if it generated sufficient activity after some years, commission an in house or external architect to erect a prominent new branch building.