THE MULTIFUNCTIONAL ROLE OF THE OTTOMAN BANK & OTTOMAN GOVERNMENT’S LOAN ISSUES BETWEEN 1854 AND 1865

Asst. Prof. Dr. Altan MASUN Marmara University, TURKEY

ABSTRACT

The aim of this study is to explain the multifunctional role of the Ottoman Bank & Ottoman Government’s loan issues between 1854 and 1865 (1854 was the beginning year of the Ottoman Government’s loan issues and 1865 was the year in which the Ottoman Government used the loan in order to pay the interest of previous loans) The Ottoman Bank (Imperial Ottoman Bank after 1863) acted as a commercial bank, as a bank of issue (the issue of money; there were four sorts of money circulating in the Empire) and as a state bank dealing with the state’s financial operations. The Bank also gave advances to the Ottoman Government many times for the purpose of salary payments. Indeed, as Prof. Jacques Thobie points out (Professor Emeritus at the University of Paris VIII, former Director of the French Institute of Anatolian Studies in İstanbul) from the time of its birth, the Imperial Ottoman Bank was not a bank like any other. Established by foreign capital (British and French), it was at the same time the central bank of an Empire which in Egypt had become colonial and was above all proto-colonial in İstanbul. The debt loans of 1854 and 1855 were the first loan issues of the Ottoman Empire in Ottoman financial history. Ottoman financial markets, were largely affected by local bankers and sarrafs, the so-called Galata Bankers, afterwards, other loan issues were realised. The year 1863 was extremely important because the bank had not been able to continue its operations. In 1863, the Imperial Ottoman Bank started its operations with its new name. Its birth was directly related to the issue of money and of monetary stabilization The 1865 loan was different than others in the sense that the loan was the first of a series of loans that were issued without interruption, the proceeds of which were never destined for any other purpose than to pay off the coupons of the previous loans. At the end of our study, a financial analysis of the Ottoman Bank has been given. The financial ratios of the bank, namely ROAA (Return On Average Assets) and ROE (Return on Equity) are analysed. In other words, there is a steady rate of profitability ratios as analysed between 1856 and 1880.

Keywords: Ottoman Debt, loan issues, bond revenues, Collateral, British & French Governments.

1

2.Financial Conditions & Distress of The Empire After 1850’s

At the second half of the 19th century many countries had been debted from the financial centers of Europe like Paris, London, Frankfurt and Viennes. These countries had to default their debts while they had been unable to find new resources. Consequently they were under the control of international capital.1

Ottoman Economy had lived the same process and Ottoman debt from international capital markets had resulted in another form of integration to the world economy.2

In 1845, following the reform of the currency, the Ottoman government sought to stabilize the exchange rate and prevent devaluation of the kaime ( paper money Ottoman currency) by concluding an agreement to this effect with two Galata (Galata was the banking district of Istanbul) bankers named Alléon and Baltazzi. In return for an annual grant of 2 million piastres, these two man undertook to maintain the exchange rate at 110 piastres to the pound. In 1847, their association took the name of Banque de Constantinople (the bank of Constantinople) which did indeed succeed, during its brief of existence, in defending the parity of the paper piastre. However, hawing been set up without any capital and hawing had to agree the treasury an advance of 130 million piastres, the only way the bank could obtain the necessary resources was by contracting loans abroad. The crisis that shook the markets of Western Europe in 1848 hit the bank hard, shattering its credit and finally forcing it into liquidation to 1852.3

All intervention on the exchange market having now ceased the price , price of the pound sterling rose steadily, eventually reaching 150 piastres. The government then opened talks with French financier Trové – Chauvel with a view to setting up a new company, to be known as Banque Nationale de Turquié (the National Bank of Turkey). This institution, which would have been placed under the authority and direct control of the Ottoman Government, would have had 100 million francs worth in building railways, roads and canals, in mines, forests and agriculture, and in commercial discount operations. However, the outbreak of

1 Şevket Akar ve Hüseyin Al, “Osmanlı Dış Borçları ve Gözetim Komisyonları, 1854-1886”, p.1, Osmanlı Bank Historical Research Center, İstanbul, 2003. 2 Gürsel Seyfettin, “Osmanlı Dış Borçları”, Tanzimattan Cumhuriyet’e Türkiye Ansiklopedisi, c.3, p.672, İletişim Yayınları, İstanbul, 1985. 3 Autheman Andre, The Imperial Ottoman Bank p.20, Otoman Bank Historical Research Center, İstanbul, 2002, A. Du Velay, Essai Sur, l’histoire financiére de la Turquie Ottoman Bank R.S., p.120, Paris 1903.

2 hostilities with Russia was finally to frustrate the scheme. The war which began an 27 October 1853, resulted in a substantial increase in military expenditure and a large treasury deficit. The Ottoman Government had to cover that deficit.4

Ottoman Empire started its debt journey in 1854. In the following years foreign debts increased due to new issues of debt to pay the principal and the interest of the debts and to finance luxurious consumption, In 20 years, Ottoman Empire had to default its debts and lost its financial independence by establishment of Düyun-u Umumiye (Debt Administration Agency in 1881) of the reasons why Ottoman Empire fell behind the trends of 19th and 20th centuries. 5

3. Foundation of Ottoman Bank

On 4 February 1856, a few days before the opening of the Paris peace conference, Sultan Abdülmecit П, at the request of, and under pressure from the allied powers, promulgated the Hatt-ı Hümayun, a fresh imperial rescript designed to complete the work under taken by the 1839 Hatt-ı Şerif of Gülhane. Among the provisions of this decree governing public finance, Articles 24 and 25 ran as follows: we undertake to create banks and other similar institutions to achieve reform of the financial and monetary system and to create funds designed to augment the empire’s source of public material wealth. To achieve these ends, we shall seek ways of benefiting from the sciences, arts, and capital resources of Europe.6 This text sets out, in a few clear words, the objectives pursued by the imperial government, objectives that had already been behind the previous experiments. (Banque de Constantinopole) .It was a question, on the one hand, of introducing some order into the financial situation, notably by with drawing the old paper money, and on the other hand exploiting the untapped resources of the Ottoman Empire. Clearly, the possibilities of the local market were not up to achieving these objectives, the need to draw on foreign capital was explicitly admitted. The war and the loan issues of 1854 and 1855 had altered public opinion on this point.

European financiers were not unaware of the parlous state of Ottoman finances, but the success of the recent loans, the backing of the British and French governments, the

4 Autheman, op. Cit, p.20-21 5 ERTUNA, Özer, Osmanlı ve Türkiye Ekonomilerinin Borç Bunalımı Muhasebe Finansman Dergisi, MUFAD Yayımı, Ekim, 2004, p.6 6 Autheman, op. cit.p.22, G. Young Vol II, p.9

3 favorable outcome of the war, and the reformist intentions of the government seemed to promise a recovery to which many wished to contribute capital and expertise.7

Grand Vizier Ali Pasha and Fuad Pasha the minister of Foreign ….., their job was to translate into fact the Imperial directive, of the Hatt-ı Hümayun of 1856.

Among the various projects presented to them (to Divan in a bradest sense the council of ministers), three in particular deserve special mention.

• A Rothschild project (London, Paris, Vienna);

• A French project, promited by the Peneire brothers and the Crédit Mobilier group;

• A British project stemming from a group of London financiers headed by Austen Henry Layard, a member of parliament with a long-standing interest in the Ottoman Empire, and by the Glyn, Mills-Co banking house.

The scheme initiated by Emile and Isaac Pereire Brothers took shape on 22 February, 1856, with the signing of a protocol anticipating the foundation of a Banque Générale. Ottoman (General Ottoman Bank) which was to have its registered office in İstanbul but it’s administration in Paris and which would have the attributes of a French limited company. The capital of 55 million francs, a quarter of which was to be paid in from the start, would be divided among 25 partners to include the Pereire brothers, Meissieurs Fould and Oppenheim, Baring Brothers Bank, Messrs Hottinguer-Co, Duke de Morny, etc.8

4. The First Operations of the Ottoman Bank

The Ottoman Bank began operations in the Galata business Quarter of Istanbul on 13 june, 1856. A branch was opened in Izmir, the Empire’s principal export port, as early as the following month, and another in Beirut in October. By the end of the year fourth establishment was in operation in Galate in Moldovia. Finally, Bucharest completed the network in November 1861.9

The bank’s beginnings were modest: a staff of only six ran the Istanbul office (this was to double two years later) and there were only four people in Izmir Originally. In each

7 Autheman, op. cit, p. 26 AN, 207 AQ, 1BO1, Vienna, Memorandum (Undated and unsigned) 8 Autheman, op. Cit, p.23, AN, 207 AQ, 1BO1 9 Autheman,,op. Cit., p.27, , AN, 207 AQ, 193 DG-AQ – Circular of 13 June, 1856.

4 branch office, the manager was assisted by a local board recruited from among the members of the British Community there.10

It was the impossibility of constituting such committees that led the administrators of the bank to refuse on 21 August 1856, to set up other branches in Aleppo, Salonika and Edirne.11

The Ottoman Bank was not the first bank founded in the Ottoman Empire. There were several antecedents – at least one of which had even borne the same name. Nor was it the only candidate, in the mid-1850s,to establish offices and branches in the Ottoman dominions with a view of taking advantage of still largely untapped economic and financial resources.12 It had to compete against many other schemes, sponsored and proposed by a great variety of groups, ranging from prestigious names such as the Rothschields or the Pereire brothers to much more modest initiatives of local bankers. Even after its foundation, in 1856, the Ottoman Bank had to face on several occasions very serious threats coming from alternative projects with even greater claims and ambitions. Despite all this competition, the Ottoman Bank was able to maintain its prominent position on the Ottoman financial market under the terms of the circular announcing the opening of its İstanbul Office, the Ottoman Bank was to operate “as a deposit, circulation, discount and commercial bank” and to perform ‘all such operations as may guarantee and facilitate commercial transactions. In fact, as well as providing exchange and commercial-credit facilities, the bank was heavily involved, like the local banks, in making advances to the government.13

The Ottoman Bank’s charter was clear on this point: “the said Company is and shall be established for the purpose of carrying on Business of Banking in Constantinople with Branch Banks in any other parts of the Turkish Dominions except in Egypt,”14

10 Autheman op. Cit, p.27. OBA-I-General Journal of OB, 1856 and 1858 and OBA – L – OB Committee, Minutes. 11 Autheman op. Cit, p.28. OBA-L- OB Committee, Minutes, 21 Ağustos 1856. 12 Ethem Eldem, A history of the Otoman Bank,, p.12, Otoman Bank Historical Research Center, İstanbul 1999 13 Autheman, op. Cit. p.28, AN, 207 AQ, 193 DGAO 14 Eldem, op. cit., p.55, OBA, Royal charter of incerporation of the Otoman Bank, 24 May 1856

5 5.OTTOMAN EMPIRE’S LOAN ISSUES (1854 – 1865)

A) The 1854 Loan Issue

Sultan Abdulmecid’s tendency to luxury had increased all the government expenditures and Palace expenditures. On the other hand, Crimean War expenditures had brought a high burden on the Treasury so the revenues were not sufficient to meet government expenditure, On 4 August 1854, Sultan Abdülmecid had given permission of a loan for 5.000.000 £.15 Although the total of the loan was for 5.000.000 £ , an initial loan by the firm of Dent, Palmer Co,, of nominal 3.000.000 £ was placed in London.This loan was guaranteed by the Egytian tribute and the Egyptian tribute was to be deposited at the British and French banks.16

The interest rate was 6 percent and the loan was repayable in 34 years. Issued at a price of 80 percent, which ensured a real return of 9 percent It earned the Ottoman Treasury only £2.286.285 after deduction of expenses and commission fees.

B) Loan Issue of 1855

This loan was for 5.000.000£. The Ottoman Government had given up its rights from the 1854 loan which had a total of 2.000.000 in order to issue a fresh loan in the nominal amount of £5.000.000.17

The French and British governments agreed to underwrite that loan, The interest rate was at 4 percent and with a repayment of 42 years. It was in fact placed by Mersis. Rothschild of London at a rate of 102 5/8. The part of the Egyptian tribute that was still available ,together with the customs reverses of Izmir and Syria was specifically allocated to servicing this loan.18 The guarantor powers of looking into the state of Ottoman finances and making sure that the yield from the loan was indeed used to defray war expenses. The two commissioners appointed were the Marquis de Ploeuc and Lord Hobart,who where respectively to the first and second managers of the Imperial Ottoman Bank.19 This

15 Sayar Nihat, Türkiye’de İmparatorluk Dönemi Mali Olayları, p.192-193, İst. 1977, İTİA Yayın ve Yardımlaşma Vakfı 16 Ölçer, Cüneyt: Osmanlı Devleti Borç Anlaşmaları, -Les Contrats des Dettes Publiques entre L’Etat Otoman et la Banque Imperial Ottoman, p.3-4-5, İstanbul, 1989 17 Ölçer, op. cit., p.6-7 18 Autheman, op. cit. p.21-22, ….. Velay, op. cit. pp.139 19 Ölçer, op. cit. p.5-6-7

6 commission formed the basis of Debt Administration Agency which would have occured in the following years.

C)1858 Loan Issue

Ottoman Bank was still the only bank in activity and could continue its operatious with the state. The 1858 loan would offer yer another profitable occasion to do so. This loan was coutraited with Dent,Palmer Co. of London for the sun of £3.000.000 and an Option to an additional £2.000.000,guaranteed by the customs revenues of İstanbul. The first £3.000.000 were placed with great difficulty to the pent that the optional £2.000.000 could not be placed before 1859,and at a rate of issue that was lowered to 62;5 percent.20

And at a rate of issue that was lowered to 62,5 percent. The Ottoman Bank played an active role in the issue, purchasing a nominal £320.000 of the bonds and in December 1859 another 620.000 of bonds that had remained unsold. This participation to almost one fifth of the loan eventually brought a profit of a little over £15.000, The British market was particularly sceptical as to the guarantees and uses of the loan.

D) Loan Issue of 1860 (M. Miresloan)

Monsieur J. Mires, a succesful banker and speculatır, manager og the Edisse générale des chemins de fer, he had been to couple his financial power with the power of the media, trought the ownership of several denily newspapers.

He propesed a loan of 400.000.000 fransc that would alleviate the immediate financial needs of the Ottoman government.

The uanditions under which the loam was negotiated and signed, an 29 October 1860, were reflective of ottoman distress, 21 (Amount: 400.000.000 FF.)

The nominal sum of 400.000.000 francs would be issued at 53,75 percent, the lowest rate of issue ever imposed on the Ottoman state with 6 percent the real return of the loan.

20 Eldem,opcit,p.68 21 Eldem, op. Cit., p.76

7 Came to 11 percent, while the sum that would enter the state treasury was reduced to 215.000.000 francs, to be paid in eighteen monthly installments on top of that, the government had agreed to a 1,5 percent commission, a yearly subsidy of 273.000 francs for the duration of the whole process, as well as compound interest on all payments. All these additional costs represented over 50.000.000 francs, thus effectively reducing the net produce of the loan to less than 165.000.000 francs and raising the real rate of return to over 13 percent.22

E)1863 Loan Issue (Emprunt Ottoman 1863)

In 1863 the Ottoman government decided to borrow from abroad in order to solve the problems of the payments, floating debt to the Galata bankers and the continuing devaluation of the copper coinage that had entered circulation during the reign of Mahmut II (1808-1839) the securing og the loan was to be hamdled by the newly established.

Ottoman Bank, the volume of the loan set at 200.000.000 francs with an interest rate of 6 percent, as collateral offered the silk tithe from the provinces of Bursa and Edirne and the tithes on olive, salt and tohacco from the provinces of Midilli, Karen and İzmir.23 In 23 ½ years.24

The government realised 150.000.000 francs of the of the total loan in the same year thought the floatation band worth 500F, 2500 and 5000F.

Public subscription began on 18 April, 1863. It was guaranteed by a consortium comprising ensentially the bank itself. (22 ½ million frances), Credit Mobilier (35 milion frances=, the French directors and stuff running the bank (58.325.000 francs) and the British members of the Committee(15 million francs). The securities were sold to the public for 360 francs per band and the result made it possible to undertake repayment of certain short-term

22 Eldem, op. Cit, p.76. Velay, op. Cit., p.157-158 23 Aslantepe Cengiz, “Eski Tahviller ve Hisse Senetleri Osmanlı İmparatorluğu Dönemi ve Cumhuriyetin ilk yılları TKB Yayını, p.4, Ankara 1993 24 Autheman, op. cit., p.49

8 debts to Galata bankers.25 Unfortunately, it had been imposible to rectify the shortcomings in the monetary system.26

The whole operation proved highly profitable for the bank. The 1863 accounts record a profit of ₤74.380 in this respect and the 1864 accounts a profit of ₤38.850, with the latter financial year showing an additional profit of ₤13.636 on bronze coin supplied in exchange for beşlik. Comparing these figures with net-profit figures for the same two years (₤185.680 and ₤242.621 respectively) gives some indication of the importance of this truncation so far as the bank’s early results were concerned. If we also take account of the other profits stemming from the Imperial Treasury (remuneration under the articles of association, interest on the current account and various temporary advance, commission on payment of debt company and various other operations), profits that rose as high as ₤87,765 in 1863 and ₤135,321 in 1864, the bank’s profitability seems to have rested wholly on its relations with the state.

F) 1865 Loan (Dette Generale de l’Empire Ottoman)

By the beginning of 1865 the Ottoman government had had recourse to foreign loans seven times it had first borrowed from abroad in 1854. In 1865 the government decided to convert the boards of these loans, which had been bought bye the Galata bankers and interests in Britain and France, with new foreign loan, 50 as both to ease the repayment schedules and to create fresh resources.27

The new loan totaled 40 million Ottoman Lira. The conversion of old bonds accounted for 29 million lira of the total with seven million representing new resources and the remaining four million was to cover operating costs. An agreement was reached with the London-based General Credit and Finance Company with regard to the handling of the translation.

25 Autheman, op. cit., p.49 26 Aslantepe Cengiz, op. cit., p.4 27 Aslantepe, op. cit. p.5

9 January 1866 was approaching (the month when debt coupons fell due), the imbalance of the Treasury was greater than one million liras. The imperial Ottoman Bank had already had to intervene in previous years, making short-term advances to enable interest owed to bendholders to be paid on time.28

In view of the urgency of the matter, the agreement was concluded swiftly due to open one week later. The loan was for a nominal 150 million francs at 6 percent interest redeemable in 21 years, to be issued at 66 percent of par. The bank gave a firm commitment with respect to one-third of the loan and a conditional commitment with respect to two-thirds at a price of 65 percent less 5 percent commission. It had obtained a broad range of support for the offering, including the backing of Crédit Mobilier, and it retained only one-fifty of the loan itself. The guarantees assigned bye the state to service the loan totaled 23 million frames and consisted principally of the proceeds of the on Anatolian sheep.

When the issue was announced, General Credit and Finance mounted a vigorous protest on behalf of holders of the general debt, cleaming that assigning specific guarantees to the new loan violated the provisions of the law creating that debt. The Ottoman government rejected the protest and, to reassure creditors, undertook to pay the Imperial Ottoman Bank the revenues assigned to guarantee its foreign debts and those necessary to cover the interest on and repayment of its domestic debts.29 However, this incident inevitably damaged the success of the loan, which investors were extremely slow to take up.Anticipating these difficulties, the Imperial Ottoman Bank had confined its commitment to one-third of the total amount of the issue in the event of trouble stemming from the opposition of holders of the general debt. The committee vas thus able to tell the General Meeting of 27 June, 1866, that the risk of the bank did not exceed ₤240.000. it was possible to liquidate all the bonds in the bank’s portfolio before the end of 1868, but in 1870 more than 72.000securities (out of a total of 300.000) remained unissued.

28 Autheman, op. cit., p.52 29 Autheman, op. cit. p.52 AN, 207AQ, 235 D-10. Circular of 14 December 1865. AN 207 AQ, 235, p.11

10 6. Financial Analysis & Results of The Bank

A) The Results of The Bank

The results of the bank were, generally speaking rather satisfactory. At the end of 1856, after six months of activity it could boost net profits of 31.479 sterling and distribute a divident of 15 schillings per share. The following semesters – the bank functioned on the basis of twice – yearly statements – confirmed this trend of profitability, despite a certain irregularity and pronounced tendency to channel part of these profits into reserve funds.30

B) Profitability Analysis of The Bank

Below, overall profitability ratios for Ottoman Bank – Return On Average Assets (ROAA) = net profit / average assets and Return On Equity (ROE) = net profit / equity are calculated. Until 1862, balance sheets had been prepared for every six months, afterwards yearly financial statements had been prepared.

6 Months Period

ROAA Net Profit 31,5 ROAA 19,8 ===%4,295 ==%2,010 as of 21 Dec 1856 Average asset 733,4 30 June 1861 985

ROAA Net Profit 17,3 ROAA 32 ===%2,171 ==%3, 278 as of 30 June Average asset 796,55 31 Dec 1861 976,05

ROAA Net Profit 6,1 ROAA 79,4 ===%0,696 ==%6,235 31 Dec 1857 Average asset 876,15 30 June 1862 1273,4

ROAA 11,2 ROAA 57,4 ==%1,163 ==%3,965 30 June 1858 962,45 01 Dec 1862 1447,45

ROAA 53,4 ROE 31,479 ==%3,674 ==%8,61 31 Dec 1858 1453,45 As of 1856 365,5

ROAA 22,8 ROE 17,3 ==%1,170 ==%4,61 30 June 1859 1948,15 As of 30 June 1857 375,2

ROAA 43,3 ROE 6,1 ==%2,464 ==%1,22 31 Dec 1859 1756,75 31 Dec 1857 498,7

30 Erdem, op. cit., p.56

11 ROAA 45,2 ROE 6,1 ==%3,559 ==%1,22 30 Jun 1860 1269,8 31 Dec 1857 498,7

ROAA 21,6 ROE 11,2 ==%2,050 ==%2,24 31 Dec 1860 1053,3 June 1858 500

ROE 53,4 ROE 22,8 ==%10,68 ==%4,56 Dec 1858 500 30 June 1859 500

ROE 43,3 ROE 30+15,2 (*) ==%8,66 ==%9,04 Dec 1859 500 June 1860 500

ROE 21,6 ROE 19,8 ==%4,32 ==%3,96 Dec 1860 500 June 1861 500

ROE 32 ROE 79,4 ==%6,4 ==%14,59 Dec 1861 500 June 1862 544,1

ROE 57,4 ==%10,44 As of 1 Dec 1862 550

(*) profits realized on issuing and playing the 1858 loan and carried directly to reserves.

We can say that the result – the profitability raties of the Ottoman Bank are satisfactory the ROAD and ROE (return on equity) (return an average assets) ranging from %0,59 to %10,093 for average return an assets, and ranging from %1,22 to %14,59 for the return on equity.

12 Table: Net Result of The Bank-I Osman-I Şahane31

Financial Year Ottoman Bank (İn Thousands of Pounds Sterling) Balance-sheet Balance Sheet Published Profit Return (%) on Return on capital Capital Paid-in and published reserves Total Assests Total investment (%) ROAA 1863 1.350 Average Asset 3.039,4 185,7 6,109 13,755 1864 1.368,6 3.746,85 4.454,3 242,6 6,474 17,726 1865 1.725,8 4.241,85 4.029,4 159,3 3,755% 9,230 1866 2.052,6 4.189,25 4.349,1 212,8 5,079% 10,367 1867 2.077,3 4.516,4 4.683,7 262,5 5,812% 12,636 1868 2.103,7 5080 5.476,3 298,9 5,883 14,208 1869 2.169,1 6.954,3 8.432,3 314,3 4,519 14,489 1870 2.211,1 7.662,75 6.893,2 229,8 2,998 10,393 1871 2.246,6 6.877,15 6.861,1 326,6 4,749 14,537 1872 2.294,6 6.470,15 6.079,2 336,6 5,193 14,643 1873 2.346,3 6.828,85 7.578,5 256,2 3,751 10,919 1874 5.367,7 1.2045,51 6.512,5 848,1 + 367,7 10,093 22,687 1217,8 1875 5.600 1.3080,8 9.649,1 620,7 4,748 12,414 1876 5.000 8.421,55 7.194 264,8 2.144 5,296

31 Eldem Op. Cit., p. 506.

13 Conclusion

The examination of Ottoman financial history , debt loans and credit agreements between 1854 and 1865 was extremely important from the point of Ottoman government, British government and French government and also investors, suppliers of funds. The Ottoman bonds had been sold at a discount from its nominal value. In other words, Ottoman government paid high interest for borrowing. Ottoman Bank had had an active role nearly in all operations except a few after its foundation in 1856. The 1854 and 1855 loans had been resulted in such a way that a representative from British and French government would be dispatched in order to monitor the way in which the loan was used. The 1858 loan was issued in order to reach the goal of withdrawing the kaimes (paper money) from circulation. 1860 loan had been realised to meet the annual servicing of foreign loans already received the withdrawal of banknotes from the market and to meet the annual installments and interest of the domestic borrowing and to redempt short term loans from Galata bankers. 1863 loan had aimed to reduce the short term fluctuating to Galata bankers and the withdrawal of copper money. 1865 loan issue was used to pay off the coupons of the previous loans and to balance the budget.

The Ottoman Bank and the Ottoman Empire had common interest many times but sometimes there had been conflict between two parties. The Ottoman Bank financial operations and services provided for the Ottoman government brought substantial profits for the bank despite strong financial corporations, as can be seen in profitability ratios.

14

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