Ottoman Bank

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).

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 24 May 1856 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.

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.

[9] 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 Khan Antoun Bey [ar], then the main building in the Beirut Souks.

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.

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.

More generally, the implementation of the convention and of the BIO's new role quickly ran into practical difficulties and opposition from local government officials, compounded by the dismissal in late April 1875 of its champion Hüseyin Avni Pasha.

On 6 October 1875, grand vizier Mahmud Nedim Pasha unilaterally decided and announced a change in the terms of reimbursement of the recent loans, without consulting the BIO,[17] and later in 1875 the Ottoman authorities suspended the implementation of the February convention altogether.

[16] 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 30 May 1876 and of his nephew and short-lived successor Murad V on 31 August 1876.

The chairman of its Paris committee, Charles Mallet [fr], suggested to French foreign minister William Waddington a new organization on the model of the Caisse de la Dette that had been established in 1876 for Egypt, but with greater consideration of Ottoman sensitivities.

By convention of 22 November 1879 the Ottoman authorities farmed out six revenue streams to a BIO-led syndicate for a duration of ten years, namely stamp duty, taxes on alcohols, on fishing in Constantinople, on silk in four provinces, and the salt and tobacco monopolies, the latter two being by far the largest.

As Cyprus came under British rule, the BIO promptly opened branches in Nicosia and Limassol in 1879 to serve the new authorities on the island, with a dominant position despite local competition from the Anglo-Egyptian Bank.

The Régie or Ottoman Tobacco Company had a difficult start fighting smuggling, but became prominent enough that it shared half of the new head office building that the BIO had erected for itself in Galata in 1892.

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.

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.

It subsequently restarted short-term lending to the Ottoman treasury, but attempted to limit the corresponding amounts, which generated serious friction with finance minister Hagop Kazazian Pasha in the late 1880s.

[21] In the 1900s, the bank was continuously involved in efforts to work out the Ottoman public debt, including the negotiation of a restructuring enshrined in the decree of 14 September 1903 together with the Comptoir National d'Escompte de Paris and the Banque Française pour le Commerce et l'Industrie.

The deterioration of security in the three Ottoman provinces of Macedonia (Salonica, Monastir and Üsküb) during the period of Macedonian Struggle led the Western powers to request administrative reforms in the region.

Rather than having to countenance yet more foreign intervention, Sultan Abdul Hamid II in early 1905 asked the BIO to take over the full treasury service in the three Macedonian provinces along the terms of the convention of February 1875, which had never been formally abrogated.

[23] 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 Boatmen of Thessaloniki, an anarchist group, bombed the bank's branch in Salonica and adjacent buildings on 29 April 1903, killing a night guard, as part of a two-day campaign of terrorist attacks that also damaged railways and a French passenger ship.

[25] The early years of the war period did not interrupt the rapid expansion of the BIO's branch network, with 31 openings from 1908 to 1914, despite the closing of Benghazi and Tripoli following Italy's victory in Libya.

Conversely, London and Paris kept control of the bank's operations on allied ground, including Egypt, Cyprus, northern Greece, and territories conquered from the Ottomans such as Basra from February 1915, Mytilene from June 1917, and Palestine from January 1918, as well as Trabzon during its occupation by Russian forces.

Instead of relocating its head office to France as it had briefly considered in 1918, the BIO decided to leverage its international identity and to re-emphasize the complementarity between London and Paris in its governance, even though by then only about a tenth of its shareholding base was British.

In Cyprus and the near east the BIO further opened branches in Paphos (1918), Kirkuk (1920), and Troödos (1921), Bethlehem, Ramallah, and Nablus (1922), in the Musky neighborhood of Cairo and in Ismailia (1924), Amman (1925), and Tel Aviv (1931).

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.

The London Committee managed the existing network in Cyprus and Egypt, and led new developments in Jordan (1925), Sudan (1949), Qatar (1956), Kenya, Uganda, Tanzania and Rhodesia (1958), Abu Dhabi (1962), and Oman (1969).

The Banque de Syrie et du Liban, formed in 1919 to take over the former BIO branches in those countries, had its Syrian activity nationalized in 1956 following the Suez Crisis, and merged into the state-owned Commercial Bank of Syria in 1966.

[37] From the 1880s to World War I, a Paris-based officer generally known as the administrateur délégué, starting with Théodore Berger who had earlier been the Secretary of the Paris Committee, played a key executive role in running the BIO in close coordination with the management based in Constantinople.