ANNEX I

The Ottoman Bank

The Ottoman Bank until 1924, known as the Imperial Ottoman Bank was founded in Istanbul by the Ottoman Turkish government on 4 February 1863, in the aftermath of the Crimean War, in conjunction with bankers from France (the Pereire brothers, Hottinguer, Mallet, Vernes, and de Neuflize) and Britain (Glyn & Co & Henry Layard) as part of the overall reforms intended to modernise the Ottoman Empire. It acted simultaneously as the central bank, a commercial bank and an investment bank, and was also the sole currency issuer for the Ottoman Empire. The bank s management structure was a reflection of its Franco-British background, with each of the two nations having equal representation in its management bodies right up until the 1990s.

The bank embarked first of all on cleaning up Turkey s finances. It launched substantial bond issues on the London and Paris markets, which enabled the withdrawal of excess paper currency from circulation and the consolidation of Turkey s floating debt, a hangover from the Crimean War.

In 1874, the bank took over the Austro-Ottoman Bank, increased its capital to 10 million pounds sterling, and became the treasurer and paying agent of the Empire. The following year, the Turkish government was overtaken by major financial difficulties and was forced to suspend debt servicing. The situation was aggravated by the war against Russia, in which Turkey suffered final defeat in 1878. During this period, the bank provided the state with essential financial support, devoting three-quarters of its assets to this task. When peace was restored, the bank played a highly active role in 1881, during negotiations to restructure the Turkish debt.

In 1890, with Turkish finances restored to health, the Ottoman Bank started to develop a dual role: financing the economy and promoting companies. These activities were only briefly interrupted by a financial crisis which hit the bank in 1895. A large number of branches were opened throughout all the regions of the Empire and in Egypt. In 1914, on the eve of the First World War, the bank s network comprised 80 branches; 16 in Europe, 37 in the Near East, five in Egypt, and others in Syria, Mesopotamia, Arabia and Cyprus.

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