Abstract
1 Banking in Turkey The banking sector constitutes the greater part of the Turkish financial system. Nearly all of the activities taking place in both money and capital markets are carried out by banks. It is a consequence of the country's economic and historical development that Turkey's financial system and its banking sector are virtually synonymous with one another. Many factors have combined to give banking such a broad function in the Turkish economy. Among these are: The economic structure of Turkey peculiar to itself, The choice to turn resources into long-term investment through the banks for the objectives targeted in the development plans and programs, and the establishment of banks by the state to finance certain sectors, Extensive application of Continental European banking practices as models in the legal structure of the banking system, and A newly-developing capital market able to cpmpete with the banking sector. l.The First Ottoman Experiment With Paper Money In 1840 The OTTOMAN Government began, in a modest way, a financial experiment - the issue of paper money. It marked the beginnining of a new era in Turkish monatary history. The experiment continued, with many visissitudes, until 1862. 1 The kaime, as the paper money was called, eventually came to be hated to many Ottoman subjects, when all of it was retired from circulatino in 1862 there was public rejoicing. 1 Bilotti, Banque Impenale,.94, says 8 months. He should have known better, since he was an Ottoman Bank employee.2 The later years of the experiment are better known than the early ones, which still require further investigation. İt is clear that the kaime was first issued because of a treasuy crisis in early years. WhenOttoman sultans had been faced with such crisis and could not easily increase revenues, they had resorted to debasing the coinage. One result of this practice was the circulation, in the early 19. Century, of a 5 and - plaster pieces : the beşlik and the altılık, which were accepted only at a discount in terms of gold. 2. Historical Background to the Banking The development of the Turkish banking sector can be divided into 6 periods which differ in respect to policies and methods: The Period of Money-Changers and the Galata Bankers pre-1847): In this period, all quasi- banking activities were carried out by money-changers and the Galata bankers who were mostly from the minorities in Istanbul. The Period of Foreign Banks (1847-108) : Because the financial situation of the Ottoman Empire had deteriorated after the Crimean War, the Empire faced the need for external financial support. Great numbers of foreign banks arrived with the purpose of extending credits to the Empire at high interest rates. The Osmanli Bankasi Ottoman Bank) was also established in 1856. Its head office was in London and it served as a central bank until the 1930s. >:/.t,-^5'^-3.DeveIopment of National Banking and Implementation of Etatism (1909-1923) : The years following the Second Constitution (1908) brought in the national banking movement as a reaction to foreign banking. Twenty- four national banks were established in Istanbul and Anatolia between the years 1908 and 1923. However, foreign banks continued to dominate banking activities due to the consecutive wars 1911-1922 between capitulations given to foreigners and national capital scarcity. In 1923, the first National Economic Congress held in Izmir dealt with a large number of economic problems that the country would have to overcome. The Congress took the decision that banks would be established to finance main sectors of the economy. Turkiye-I? Bankasi (1924), Sanayi ve Maadin Bankasi (1925), and Emlak ve Eytam Bankasi (1927) were established in order to provide commercial, industrial and housing credits respectively. However, the negative effects of the Great Depression on the balance of payments and lack of domestic capital called for a government-supported economic development policy in the following years. As a result of this policy, six state banks were established in the 130s, including the Central Bank of the Turkish Republic. f^- '. `'feA
