OTTOMAN BANK MUSEUM - WAR AND CRISIS

A Bank of Questionable Allegiances 1908 - 1914



The Second Constitution, proclaimed in 1908, and the ideological turmoil it triggered brought about a questioning of the Ottoman Bank's identity. The bank had initially thought that the Constitution would bring political and financial stability to the Empire and had pressured the London and Paris committees to obtain support for the Young Turk regime. Yet, in the eyes of nationalist circles, the notion of a state bank run by British and French interests was perceived as an unacceptable contradiction. Moreover, the Young Turks were more and more drawn into the sphere of German influence. By 1914, Finance Minister Cavid Bey, one of the moderate members of the government, was probably one of the last politicians who remained in favor of the Ottoman Bank. 

The Divorce of World War 1914 - 1915



The tension between the Ottoman Bank and the government turned into a crisis when the Ottoman Empire entered the world conflict in November 1914. Upon the refusal by the London and Paris committees to satisfy the demand made by the government for an advance payment in the amount of 2,000,000 liras on 31 December 1914, Talat Bey sent an ultimatum to the bank's general manager Nias and his deputy Steeg. The minister demanded that all French and British managers of the bank resign from their offices. There was little the management could do, therefore, French and British officials withdrew and transferred the bank's administration to managers of Ottoman nationality. The compliance with ministerial orders and the continuing support from Cavid Bey saved the bank from confiscation; however, it was not difficult to imagine the conditions under which the bank would be allowed to remain in business. In fact, a similar situation awaited the bank on the other side of the conflict. A license issued by the British government had limited the bank's activities in accordance with the reduced status of “friendly” countries, banning it from any transaction with its branches in the Ottoman Empire. Virtually split into two, and stripped from its former power, the Ottoman Bank could only hope to survive the war.

The Bank During the War 1914-1918

One of the greatest difficulties the bank faced during the war was preserving the gold stocks despite the pressing demands of the army. Believing that the Ottoman Bank was not fulfilling its duties as a state bank, most government officials put an increasing pressure on its administration. In the fall of 1918, when the Ottoman Empire was finally defeated and occupied by Allied forces, life was back to normal for the Ottoman Bank. The exiled managers returned and reclaimed the administration of the bank. Nevertheless, it was obvious to all that the situation had not regained its former stability. Taking into consideration the possible success of the resistance movement in Anatolia, the bank's management took precaution by making some advances to the Kemalist troops, thus trying to act with as much foresight as possible with regards to the uncertain future of the country.

Paper Money, Again 1915-1918

The Ottoman government had hastily entered the war and was unprepared to meet the financial burden of the war effort. As it became clear that the Ottoman Bank could not, or in better terms, would not offer its support, once again, issuing paper money appeared to be the only solution. The Ottoman Bank surrendered its privilege to the government. The first series of Treasury bills were printed in July 1915. As a precaution, the first series was backed by its gold equivalent, however, from the second series on, this measure was abandoned. There followed an ever-increasing quantity of issue of Treasury bills in several denominations. The notes were printed in Germany and were of a mediocre quality, and when coupled with the chaotic situation of the financial market, it encouraged all sorts of fraud and forgery. Until the end of war, a depreciation of up to 80% of the currency against gold was taken place.