UBC Theses and Dissertations

UBC Theses Logo

UBC Theses and Dissertations

Monetary and banking system of Turkey Harmankaya, Nejat Cemil 1957

Your browser doesn't seem to have a PDF viewer, please download the PDF to view this item.

Item Metadata

Download

Media
831-UBC_1958_A8 H2 M6.pdf [ 7.58MB ]
Metadata
JSON: 831-1.0106091.json
JSON-LD: 831-1.0106091-ld.json
RDF/XML (Pretty): 831-1.0106091-rdf.xml
RDF/JSON: 831-1.0106091-rdf.json
Turtle: 831-1.0106091-turtle.txt
N-Triples: 831-1.0106091-rdf-ntriples.txt
Original Record: 831-1.0106091-source.json
Full Text
831-1.0106091-fulltext.txt
Citation
831-1.0106091.ris

Full Text

MONETARY AND BANKING SYSTEM OP TURKEY by NEJAT CEMIL HARMANKAYA B.A., .University of I s t a n b u l , 19'5>1 A THESIS SUBMITTED IN PARTIAL: .FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS i n the department of Economics We accept t h i s ' t h e s i s as conforming to the required standard The U n i v e r s i t y of B r i t i s h Columbia October, 19^7 ABSTRACT Although Turkey i s a very old country, l y i n g across between the Near East and the West, i t has only q u i t e r e c e n t l y acquired a modern system of i t s money and banking i n s t i t u t i o n s . F o r the many centu r i e s which preceded the Rev o l u t i o n of 1923 and the' i n s t i t u t i o n of the- program of West e r n i z a t i o n , the pre r o g a t i v e of coinage was exercised by the r u l i n g Sultans as much, i t would appear, as a f i s c a l device f o r meeting the emergency needs of the r o y a l t r e a s u r y , as a convenience f o r the business community. The country's modest banking needs were: supplied by merchants,, exchange dealers and casual money lenders. Banking as a separate undertaking did not make i t s appearance u n t i l the middle of the nineteenth century and then l e g a l l y as a r e s u l t of the f i s c a l emergencies i n which the- Ottoman Rulers bartered banking monopolies and the p r i v i l e g e of issue f o r the support of the c o u n t r y 1 s c r e d i t abroad. The r e c i p i e n t ' of the e x c l u s i v e r i g h t of note-issue was the B r i t i s h - F r e n c h owned and operated Osmanli Bankasi which f o r many years was the. -country's l e a d i n g b.ank. Since 1923 the -country has experienced a growth and expansion i n the banking s t r u c t u r e as the r'esult of the undertaken economic development program which has no p a r a l l e l i n modern h i s t o r y . A major part of t h i s growth has been the con s c i o u s l y planned r e s u l t of the r e l a t i v e vast r e c o n s t r u c t i o n program through which the government i s attempting to modernize the T u r k i s h economy and to e x p l o i t i t s l a t e n t n a t u r a l resources. At the center of t h i s new f i n a n c i a l r e v o l u t i o n i s the C e n t r a l Bank of the T u r k i s h Republic. Surrounding i t are- a number of government owned and operated q u a s i - p u b l i e I n s t i t u t i o n s charged w i t h the r e s p o n s i b i l i t y of c a r r y i n g out the State's program of i n d u s t r i a l i z a t i o n , and the p u r e l y p r i v a t e banks. While considerable c a p i t a l has' been obtained from abroad and from domestic saving they have been a s u b s t a n t i a l part of these- investment sour.ces and have not been s u f f i c i e n t to meet the needs of the r e c o n s t r u c t i o n program. During the past few years an i n c r e a s i n g r e l i a n c e - has been placed on the issue p r i v i l e g e of the C e n t r a l Bank, causing a serious d e c l i n e i n the purchasing power of the T u r k i s h L i r a . The recovery of the e x i s t i n g i n f l a t i o n i n the country would appear' to depend upon the by no. means c e r t a i n success of the -economic development program. The future- of the new banking community would a l s o appear- to depend upon the success of t h i s program. In p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t o f t h e r e q u i r e m e n t s f o r an advanced degree at the U n i v e r s i t y o f B r i t i s h C o l u m b i a , I a g r e e t h a t the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and s t u d y . I f u r t h e r agree t h a t p e r m i s s i o n f o r e x t e n s i v e c o p y i n g o f t h i s t h e s i s f o r s c h o l a r l y p u r p o s e s may be g r a n t e d by t h e Head o f my Department o r by h i s r e p r e s e n t a t i v e . I t i s u n d e r s t o o d t h a t c o p y i n g o r p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l not be a l l o w e d w i t h o u t my w r i t t e n p e r m i s s i o n . Department The U n i v e r s i t y o f B r i t i s h C o l u m b i a , V a n c o u v e r S, C a n a d a . Date i i i FORWARD As the r e s u l t of p o l i c i e s inaugurated by the l a t e great Kemal Ataturk, a v e r i t a b l e r e v o l u t i o n has been accomplished during the past quarter of the- century i n the structure- and o r g a n i z a t i o n of the T u r k i s h economy. Nowhere has t h i s r e v o l u t i o n been more f u l l y e xemplified than i n the country's banking system. In the chapters which f o l l o w an attempt has been made to pre.sent the f i n a n c i a l aspect of t h i s r e v o l u t i o n , not only i n the character of the money and banking i n s t i t u t i o n s themselves but also i n terms- of the u l t i m a t e economic ends which these i n s t i t u t i o n s have been designed to achieve. In order to do t h i s I have f i r s t given a b r i e f sketch of the nature of the T u r k i s h economy and the problems involved i n improving i t s . general p r o d u c t i v i t y . Thereafter i n the order named, I have traced the h i s t o r y of the country's currency and banking systems, the growth and development of i t s twelve important p r i v a t e and q u a s i - p u b l i c banks., and the c o n s t i t u t i o n , , development,, and f u n c t i o n i n g of the r e c e n t l y founded C e n t r a l Bank of the T u r k i s h Republic. In the .con-c l u d i n g chapter I have- attempted to. assess the achievements of the i n s t i t u t i o n s which have; been p a r t i c u l a r l y i d e n t i f i e d with the government's long range r e c o n s t r u c t i o n p o l i c y . In presenting these m a t e r i a l s to.- a Western audience I am not unaware of the very considerable d i f f e r e n c e between i v Western and Eastern ways and means of doing t h i n g s ; most of a l l , , the b a s i c d i f f i c u l t y of p r e s e n t i n g the problems of an Eastern country endeavouring w i t h some success to employ Western machine processes and n a t u r a l energy i n an' environment which f o r centuries has r e l i e d upon human labour and other p r i m i t i v e instruments of production f o r i t s means of s u b s i s -tence. The country does' not possess' an abundance of export-able n a t u r a l resources and must somehow contrive- to impose upon an already modest standard of l i v i n g , a s u b s t a n t i a l p a r t of the cost of the modernization program. The method employed involves the use of the p u b l i c c r e d i t and r a t h e r complicated system of controls' worked f o r the most p a r t through government-a l l y c o n t r o l l e d f i n a n c i a l agencies. However, during the past few years, private- c a p i t a l and p r i v a t e l y owned f i n a n c i a l i n s t i t u t i o n s have made an important c o n t r i b u t i o n and i t i s ' w i t h these i n s t i t u t i o n s that t h i s t h e s i s i s p r i m a r i l y ' con-cerned . I should l i k e to: record my g r a t i t u d e to Dr. J..A. Crumb under whose d i r e c t i o n I wrote the t h e s i s ; to Nuri. Pere,- the Director' General of the Yapi ve K r e d i Bankasi, who supplied me w i t h the most recent a u t h o r i t a t i v e work on the T u r k i s h money system; and to^ N a i l G i d e l , the D i r e c t o r General of the C e n t r a l Bank of the T u r k i s h Republic, who supplied me- w i t h the report and documents from which the s t a t i s t i c a l data presented h e r e i n were drawn. I s t a n b u l Turkey Nejat C.emil Harmankaya TABLE GP CONTENT'S CHAPTER PAGE I . THE TURKISH ECONOMY . . . . . . . . . . . . . . 1 1. Geography and Resources 1 2 . Nature of Economic Enterpris.es 5 a) A g r i c u l t u r e . . . $ b) Mining . 7 c) F o r e s t r y 9 d) F i s h e r i e s 10 e) Manufacturing and Industry 11 f ) Trade and Tra n s p o r t a t i o n . . . . . . 13 g) Finance 16 3 - N a t i o n a l Income by Sources 17 11. P u b l i c P o l i c y , 19 I I . ANTECEDENT MONEY AND BANKING. INSTITUTIONS . . 22: 1. E a r l y Coinage . . . 23 a) S i l v e r Coins 23 b) Gold Coins 2^ c) Copper Coins 26 .2. Printed Money - Treasury Notes .26 3 . Monetary Standards 30 a) Monometallism 31 b) B i m e t a l l i s m . . . . . . . . . . . . . . 31 c) Gold B u l l i o n Standard 35 v i CHAPTER PAGE I I I . ANTECEDENT MONEY AND BANKING INSTITUTIONS -(Continued) . 36 1. The F i r s t Money Lenders . . 36 2. F i r s t Formal Banks' 37 a) J . A l l e a n and T h . B a l t a z z i and F i r s t Domestic Bank . . . . . . . . . . . 37 b) The Bank of Ottoman 39 c) Other Fo r e i g n Banks and Agents of Foreign' Owned Banks . . . . . . . . i|0 d) Other Domestic Banks- . . . . . . . . 1±$ 3 . S u r v i v i n g I n s t i t u t i o n s . . . . . . . . . I4.9 IV. BANKING IN MODERN TURKEY - The Quasi-public I n s t i t u t i o n s 5>1 1.. Reformation under Ke'mal At a t u r k 5>1 a) Settlement of the P u b l i c F o r e i g n Debt £3 b) F o r e i g n Exchange. Control- . . . . . . p3 c) The Economic Plans . . . . . . . . . 2. The Quasi-Public Banks . . ... . . ..... ^ a) I s t a n b u l Emrtiyet S a h d i g i - The S e c u r i t y Bank of I s t a n b u l £6. b) Turkiye Cumhuriyeti Z i r a a t Bankasi -The A g r i c u l t u r a l Bank of the Tu r k i s h Republic 60 c) Turkiye Emlak K r e d i Bankasi - Real Estates C r e d i t Bank o f Turkey . . . 6.f> v i i CHAPTER PAGE d) Sumerbank - The I n d u s t r i a l Bank . . . 70 e) I l l e r Bankasi - The- Pr o v i n c e s 1 Bank . 73 f) Etibank - The Mining' Bank . . . . . . 76 g) D e n i z e i l i k Bankasi - The Maritime. Bank 78 V. BANKING IN MODERN TURKEY - The P r i v a t e I n s t i t u t i o n s . . 80 1. T u r k i s h Banking Law .=• 8 l a) C a p i t a l Requirements 82 b) Reserves and Deposit R e s t r i c t i o n s . . 82 c) Credi t R e s t r i c t i o n s . . . 8i_L 2. Important Domestic P r i v a t e Banks. 8I4. a) Turk T i c a r e t Bankasi - The Commercial Bank .of Turkey . 85 b) Turkiye .Is Bankasi - The Busine'ss Bank of Turkey 88 c) "Yapi ve K r e d i Bankasi - The B u i l d i n g and C r e d i t Bank . . . . . . . . . . . . 91 d) Turkiye- S i n a i Kalkinma Bankasi - The-I n d u s t r i a l Development Bank of Turkey 93 3- The Foreign Banks 9k-a) Economic Importance . . 95 b) The Bank of Ottoman under the Republic 96 I I . Summary 100 • y i i i CHAPTER PAGE VI. THE CENTRAL. BANK OP THE TURKISH REPUBLIC 102 1. P r o v i s i o n of the. C e n t r a l Bank Act . . . . . 10.2 a) C a p i t a l i z a t i o n and Ownership- of the Bank 103 b) Organization and St r u c t u r e 10f? c) Powers,. P r i v i l e g e s and Duties . . . . . 107 i . The Issuance of Lawful Money . . 107 i i . F i s c a l Duties . . . . . . . . . . . 108 i i i . ReS-erve Depository,: C l e a r i n g Center and Bankers. Bank . . . . 109 d) Instruments of Economic C o n t r o l -. .' . . 110 i . Discount Rate- F i x a t i o n and E l i g i b l e : Papers 110 i i . P r o v i s i o n f o r Se.curity Market Operation . . . 112 I i i . Reserve- Ratio F i x a t i o n • 112 i v . Exchange Rate. C o n t r o l 112 2. The C e n t r a l Bank as: a F u n c t i o n i n g I n s t i t u t i o n 113 a) Current Lending Operation 113 b) Government Borrowing . . I l 5 .c) Source of Funds 117 d) Foreign Exchange C o n t r o l . 118 e) Summary 120 VII... SUMMARY AND CONCLUDING OBSERVATION . . . . . . . I2li BIBLIOGRAPHY 133 i x TABLES. TABLE NO.. PAGE I. A c t i v e I n d u s t r i a l Population by Major Occu-p a t i o n a l Groups,. 1935, and 191+5 1+ IT. N a t i o n a l Income of Turkey .by Major Production Sources., years 1938,. 191+8, 1953 18 I I I . Real Growth of Gross N a t i o n a l Product of Turkey,. 1938. - 1953 . . . . . . . . . . . . . 19 IV. Treasury Note Redemption of 1863 •. • 2 8 V. Paper Value of Gold L i r a , 1913' - 1923 . . . . . 31 VP.. Summary of the D e p r e c i a t i o n of AKCA, 1313 -1818 • 32 VII.. P r i n c i p a l Assets and L i a b i l i t i e s of A l l Bornestic T u r k i s h Banks i n 1921+ . . . . . . . 50 V I I I . Items from the Assets and L i a b i l i t i e s of the S e c u r i t y Bank of Istanbul,. 1931 - 1955 . . . 59 IX- Nature and D i s t r i b u t i o n of the Loans Made by the "^• A g r i c u l t u r a l Bank of the T u r k i s h Republic on Selected Date.,. 191+6. - 1 9 5 5 61+ X. Capital,. Deposits., Loans and Earnings of the A g r i c u l t u r a l Bank of the T u r k i s h Republic- by Selected Years,. 18.90 - 1955 65 X I . C a p i t a l , Deposits., Loan's and Earnings of the • Real Estates C r e d i t Bank of Turkey by Selected Years,. 191+6 - 1955 . . ' 69 X I I . Real Estate Mortgage Loans i n Turkey.,, by Selected Years',, 191+6 - 1955 • . 69 X TABLES PAGE X I I I . C a p i t a l , Investment, Particip.ation> Loans and Earnings -.of the Sumerbank, by Selected Years, 1933 - 1955 73 XIV. C e r t a i n Assets and L i a b i l i t i e s - of the Provinces' 1 Bank, by Selected Years, 191+6 -1.955 . . . . 75 XV. C e r t a i n Assets, and L i a b i l i t i e s of the Etibank, by Selected Years, 191+6 - 1955 . . . . . . . 77 XVI. P r i n c i p a l L i a b i l i t i e s and Assets of the Quasi—. P u b l i c Banks of Turkey by Years, 192li -. 1955 79 XVII.. P r i n c i p a l Assets and L i a b i l i t i e s of the Commercial Bank of Turkey, by Selected Years,. 1933 - 1955 87 X V I I I . Earning Experiences and Dividends of the Commercial Bank of Turkey, by Selected Years 1932 - 1953 87 XIX. P r i n c i p a l Assets and L i a b i l i t i e s of the Business Bank of Turkey by Selected Years 192]+ - 1953 • • 90 XX.. P r o f i t and Dividends of the Business Bank of Turkey,, by Selected Years, 19.21+ - 1953 • •• • 91 XXI. P r i n c i p a l Assets- and L i a b i l i t i e s of the. B u i l d i n g and C r e d i t Bank, Years 19I+I+ - 1955. 92 XXII. P r o f i t and Dividends of the B u i l d i n g and Cr e d i t Bank, by Years 191+5 -1951+ 93 TABLES PAGE X X I I I . P r i n c i p a l Assets and L i a b i l i t i e s of the I n d u s t r i a l Development Bank of Turkey, . Years 1953 - 1955 % XXIV. P r i n c i p a l Assets and L i a b i l i t i e s of the Dom e s t i c a l l y Owned P r i v a t e Banks of Turkey,, by Years 1939 - 1955 95 XXV.. P r i n c i p a l Assets and L i a b i l i t i e s of the Fore i g n P r i v a t e Banks' i n Turkey,, by Selected Years 1933 - 1955 . . . . . . . . . 96 XXVI. P r i n c i p a l Assets- and L i a b i l i t i e s o f A l l the Pr i v a t e Banks i n Turkey, by Selected Years 1939 - 1955 101 XXVII. The D i s t r i b u t i o n of Shares o f the C e n t r a l Bank of the Tu r k i s h Republic i n t o D i f f e r e n t Groups, by Selected Years 1938 - 1955 . . . . lOli XXIIX. Current Dis'count and Advances, of the C e n t r a l Bank of the Tu r k i s h Republic,, by Selected Years, 1933 - 1956 . 111L XXIX. C l a s s i f i e - d Rates Posted by the C e n t r a l Bank of the Turk i s h Republic, on Various Dates, 1932 - 1955 115 XXX. C r e d i t Granted to. the Government by the C e n t r a l Bank of the Tu r k i s h R e p ublic by Represent-a t i v e Years 1933 - 1956 . 116 XXXI. Expansion i n the L i a b i l i t y Accounts of the C e n t r a l Bank of the T u r k i s h Republic,, by Selected Year's 1933 - 1956 117 TABLE PAGE XXXII. Gold Stocks,. Outstanding Currency, F o r e i g n Exchange Assets, and L i a b i l i t i e s of the C e n t r a l Bank of the Tur k i s h Republic by Years 1933 - 19^6 . . . . . . . . . . . . . . 121 XXXIII.. The Progress of the L i a b i l i t i e s .and Assets of the C e n t r a l Bank of the T u r k i s h R e p u b l i c , by Years 1933 - 1956. A p r i l 122 XXXIV. Comparative' Growth of T u r k i s h Banks Between 192I|. - 1956 129 CHAPTER I THE TURKISH ECONOMY As' a bridge between Europe arid A s i a , Turkey has' always occupied a p o s i t i o n of importance In commercial and p o l i t i c a l l i f e of the Near East. But the country i t s e l f i s p r i m a r i l y a g r i c u l t u r a l and l i v e s ' f o r the most part from a g r i c u l t u r a l e n t e r p r i s e s . U n t i l recently,- n e i t h e r the government nor the people were concerned w i t h Western con-ceptions of economic progress and the country's" l a t e n t nat-u r a l and human resources were not e x p l o i t e d to the same extent as have s i m i l a r p o t e n t i a l s i n the Western World. l ) Geography, and Resources The country has an area of 777 ,000 square K i l o -meters-—approximately 300,000 square m i l e s — o f which 97 per cent, i s on the A n a t o l i a n Peninsula of A s i a Minor and 3 per cent, i s i n Thrace of Europe. Of the t o t a l area 55 per c e n t . i s i n meadow and g r a z i n g land, 19 per cent, i s c u l t i v a t e d , and l5 per cent, i n c l u d e s the mountainous regions and waste lands but a l s o valuable sources of minerals' and metals.^ As i t i s seen above,, the p r o p o r t i o n of the c u l t i v a t e d land area, compared with the t o t a l , - i s very s m a l l . This i s 1 P r o f . Dr. Suvla R.efii Sukru, T a t b i k i Ikt.ls.at -I k t i s a t S i y a s e t i , I s t a n b u l 191+-8: I s m a i l Akguri Matbaasi, p.2ii5. 1 2 due to s e v e r a l causes; f e r t i l e lands f o r c u l t i v a t i o n are r e l a t i v e l y sear.ee, r a i n f a l l i s not s u f f i c i e n t f o r a g r i -c u l t u r a l production., and considerable arable- land has been a l i e n a t e d by the State. According to some estimates, by i r r i g a t i o n and by t r a n s f e r of the State property to the f a r -mers,, c u l t i v a t e d lands could be increased to 30 per cent, of the t o t a l . 2 The climate of Turkey i s on the- whole temperate, but v a r i e s widely from region to r e g i o n . "While the c o a s t a l areas enjoy equable c l i m a t e s , the h i g h c e n t r a l plate.au of A n a t o l i a has long, v i o l e n t winters and hot summers. R a i n f a l l v a r i e s from ten inches- per year i n middle A n a t o l i a to as much as one hundred inches on the c o a s t a l plains.. Thus, while f l o o d s are a menace i n some areas, i r r i g a t i o n .is needed i n others. Fortunately-, the a r i d regions can be i r r i g a t e d by r i v e r s which are also adaptable to power develop-ment. Among the i r r i g a t i o n and h y d r o e l e c t r i c power p r o j e c t s already completed are those on the Seyhan and Sakarya r i v e r s i n Middle and Southern A n a t o l i a which are the most important ones. Other p r o j e c t s which w i l l be completed by the beginning of 1958 are the H i r f a n l i oh the Menderes r i v e r , the DeniEk.opru on the Gediz, and the Kemer on the Akcay r i v e r . The f i r s t two are i n the Western part of A n a t o l i a ; the l a s t one, i n the 'South-eastern p a r t . With the completion of these h y d r o e l e c t r i c power p r o j e c t s j the e l e c t r i c power production of the-country• ^ P r o f . Dr. Suvla R e f i i Sukru, T a t b i k i I k t i s a t -Ikt i s . a t S i y a s e t i , I s t a n b u l 19-1+8.: I s m a i l Akgun Matbaasi, p. .21+5. w i l l be r a i s e d from 737 to I(.,.000 m i l l i o n K i l o w a t t s . Turkey's p o p u l a t i o n , according to the census of October 2 3 r d , 1955, was 2 i i , 111,178. This shows that since 1950 the average r a t e of increase, has been about three per 1+ cent, per year. Although predominantly T u r k i s h , Armenians ,.. Greeks i. Arab.s, and Jews are a l s o represented i n i t , p o s s i b l y to the extent of ten per cent. The Greeks are mostly con-centrated i n the c o a s t a l c i t i e s . , p a r t i c u l a r l y i n I s t a n b u l , I z m i r , and Trabzon. The Armenians l i v e p r i n c i p a l l y i n the Eastern c i t i e s near Armenia and i n the Middle A n a t o l i a n c i t i e s , and some are i n I s t a n b u l . The Arabs f o r the most part d w e l l i n the South-eastern Turkey,, near the I r a q u i border. Most of the Jewish people are located i n I s t a n b u l . With a land area 777,000 square Kilometers or approximately 300,000 square m i l e s , the T u r k i s h land mass-p o p u l a t i o n r a t i o works out to be about 31 per square K i l o -meter or 80 per square m i l e . However,, when we consider only the a v a i l a b l e arable lands,, the p o p u l a t i o n - c u l t i v a t e d land area r a t i o becomes 123 per square Kilometer or about 381+ per- square-mile-, which i s s t i l l quite low. Since 75 per cent, of the people l i v e i n the r u r a l areas, there i s no-problem of overcrowding i n the towns and c i t i e s , except i n I s t a n b u l . I t would appear therefore that Turkey has room 3Annual Report of the C e n t r a l Bank of the T u r k i s h Republic f o r 1955, pp. 1+5-46, Ankara, 1956. 4 l b l d ., p. 36.-f o r a l a r g e r p o p u l a t i o n and that an increase might w e l l be accompanied by an improvement i n l i v i n g standards'. In terms of occupations" the T u r k i s h element in- the p o p u l a t i o n i s ' almost e x c l u s i v e l y represented i n a g r i c u l t u r a l e n t e r p r i s e s and c i v i l s e r v i c e s . The Greeks are- f o r the most part fishermen j. h o t e l k e e p e r s a n d restauranteurs . Jews' may be said to c o n t r o l a major p o r t i o n of the country's commerce. The d i s t r i b u t i o n of the: working p o p u l a t i o n among the major occupation groups f o r the years 1931? and 19^5 was as f o l l o w s : TABLE.' I ACTIVE: INDUSTRIAL POPULATION BY MAJOR OCCUPATION GROUPS,. •:;: ,;, , r... 1931?j - 19^5- (all-r amount:s-.• i n thousands.)*:..,:.c ,,; T - -....... ~ ~ ~ ' " 1 9 3 5 " Occupational Groups Percent .. , .• :-.< :• . . . . . . .... . Number of T o t a l 191+5 Percent Number of "Total .Agriculture:,. F o r e s t r y and F i s h i n g 8 1 . 8 7 , 2 0 0 7 9 . 8 Mining 1 9 0 . 2 314- O.ij. Industry 6 3 8 8 . 1 61|.0 7 - 1 Transport and Communication 1 2 2 1 . 5 iko 1 . 5 Commerce 2 1 8 2 . 8 2 8 0 3 . 1 P u b l i c A d m i n i s t r a t i o n and P r o f e s s i o n 3 9 8 5 . 0 6 9 3 7 - 7 Dome's t i c and Personal Services • 0 . 6 3 0 G.k T o t a l . .. . 7 , 9 2 2 . , 1 0 0 . 0 . .:. 9 . 0 1 7 . • • 1 0 0 . 0 .  """Report I n t e r n a t i o n a l ment Bank f o r 1 9 ^ 5 . Reconstruet i o n and Develop-5 2) Nature of.Economic E n t e r p r l s e s , Turkey has- always been an a g r i c u l t u r a l country but, due to the recent enterprise, of the.- government,, mining,, forestry,- manufacturing .also- make s u b s t a n t i a l c o n t r i b u t i o n to the n a t u r a l product. a) .Agriculture:, According to 1953 -statistics',, a g r i c u l t u r a l production .accounts f o r 1|1L. 6 per cent. of the country's Gross N a t i o n a l Product .-^  But by Western .standards lands a v a i l a b l e f o r farm-in g .are s t i l l i n s u f f i c i e n t f o r the, .support of the whole country. There i s considerable v a r i a t i o n i n farming methods,, i n costs -of production,, and i n the a b i l i t y of the-- land to, y i e l d a surplus to i t s owners. On the A n a t o l i a n Plateau and i n the southern and western A n a t o l i a power machinery can he. used economically, i n Eastern A n a t o l i a farmers r e l y on oxen both to plow t h e i r farm .and to t r a n s p o r t t h e i r products. There i s l i t t l e , , i f any,, surplus production i n t h i s area. • Farm s i z e • i s another f a c t o r which a f f e c t s the a g r i -c u l t u r a l p r o d u c t i v i t y of the country. I t d i f f e r s from one r e g i o n to another. On the c e n t r a l p l a t e a u and i n the southern and western regions' l a r g e farms of more than 25>0 acres are predominant. They produce f o r market and use intensive,.method s,,. including. :patent ; f e r t i l l z . e r s , and.,modern -'Prof. Dr. Sanus Burhan ' Zinni,.. Para. Ec onomls1 ,„ V o l . II-,. p. 605, Istanbul,. 1956. 6: power equipment. .In the northern and eastern regions:,, how-ever, farms ar.e very s m a l l — a s a r u l e l e s s than 25 acres. They tend to be. s e l f -'sufficient and employ p r i m i t i v e product-io n methods. The reason f o r t h i s ' is" that these regions are mostly mountainous and farmers cannot, use- power machinery to ..advantage. As a consequence:,, the. peasants, i n the.se. regions of the country are le ' S ' S wealthy than those i n the western and southern p a r t s . They can produce enough only f o r t h e i r f a m i l i e s , .and have nothing" l e f t , over f o r the mar-ket . Even though s t a t i s t i c s on the- s i z e of farms i n Turkey are s t i l l f a r from being; complete-,, i t . .Can b.e said t h a t the. small farms are predominant; middle-sized farms--between 2'5 and 50 a c r e s — a r e l i m i t e d ; and large farms are e x c e p t i o n a l . The. uneven d i s t r i b u t i o n of farms has prevented,, i n many places,, the. peasants from being land owner's. In, view of t h i s fact,, the "Government i n l a s t few years has t r i e d to encourage land ownership by s e l l i n g .State, lands at r e l a t i v e l y low p r i c e s and by d i v i d i n g the large, farms' between the tenants. These p o l i c i e s ,ar.e c a r r i e d put under the- p r o v i s i o n of somewhat r e v o l u t i o n a r y Land Apt of 1950. The: . a g r i c u l t u r a l products' of Turkey d i f f e r from one region to another. For- example> T u r k i s h Thrace,, the- c e n t r a l p l a t e a u and the southern p l a i n are .suitable f o r general . '.Prof. Dr. Suvla R e f i i Sukru •, op. c i t . . . p. 23k-7 farming and produce wheat, sugar beets, cotton,, and other a g r i c u l t u r a l products. Because: of the a r i d i t y In these regions dry farming methods are used i n many places'. In the eastern,, western,, and northern p a r t s of Turkey, where r a i n f a l l i s more than s u f f i c i e n t , mixed farming i s the r u l e . Tobacoo, grapes,. figs.,., hazelnuts;,, opium.,.- and o l i v e s are the p r i n c i p a l products. The climate of the Mediterranean parts ef the .country maker p o s s i b l e double production i n one season., e s p e c i a l l y of f r e s h vegetables. In 1 9 5 5 , the country's output of a g r i c u l t u r a l products included 12l+,Sk9 tons of wheat, 50-,l|02' tons' of c o t t o n , 1|7,730 tons of barley-, lj.0,032 tons of tobacco, 3h->l&k- tens of h a z e l -nuts,, and 26 , 3 3 5 tons of re . i s i n w i t h a t o t a l value estimated at T.L. 1|32 m i l l i o n . A g r i c u l t u r a l products were a l s o the p r i n c i p a l of the. T u r k i s h export and c o n t r i b u t e s u b s t a n t i a l l y to the countryTs balance of payments. In 1955 export of g r a i n amounted to 1 3 . 1 m i l l i o n tons, legumes to 0 . 5 m i l l i o n tons, cotton t o 0 .2: m i l l i o n tons and the other : a g r i c u l t u r a l Q products, to 3 • 7 m i l l i o n tons, b) Mining, Turkey has q u i t e a d i v e r s i t y of minerals.- .Some of them such as -coal, lignite.,., -chrome-,- iron,, s a l t , , and copper 7Annual Report.of the C e n t r a l Bank of the T u r k i s h Republic f o r 1955,- P- 3 8 . ^Monthly Report, of the C e n t r a l Bank of the T u r k i s h Republic, No. 5 , May' 1 9 5 5 , pp. 81^-85. are i n abundance and can .be economically e x p l o i t e d . This i s p a r t i c u l a r l y true of chrome, copper, iron., and manganese which are among the country's p r i n c i p a l exports. According to 1953 s t a t i s t i c s , m ineral products c o n s t i t u t e the 0.99 per cent, of the country? s Gross 1 N a t i o n a l Product. Recently, petroleum has a l s o been brought up i n s u f f i c i e n t q u a n t i t y to warrant i t s e x p l o i t a t i o n . Today new studies are being done both as to the e x p l o i t a t i o n and ex p l o r -a t i o n of new minerals. The p r i v a t e domestic c a p i t a l being i n s u f f i c i e n t , some of the e n t e r p r i s e s l i k e i r o n , s t e e l , and c o a l are- being undertaken by the government. For that purpose, t o r a t t r a c t the f o r e i g n c a p i t a l to- these f i e l d s i n 1951+, the Act of the Encouragement of the Fo r e i g n C a p i t a l was proclaimed. In consequence of the new investments i n t h i s f i e l d , the country?s m i n e r a l production has been increased consider-ably. For example, i n 191+8,. copper production was 11,000 tons, i r o n 191,700 tons, chromium 285,700 tons, c o a l 1+ m i l l i o n tons, and manganese 8,300 tons. But i n 1954- these have r i s e n to 25,-200, .1+77,290, 523,600, 5 , 7 0 0 , 0 0 0 , and 1+7,100 tons r e s p e c t i v e l y . New petroleum r e f i n e r i e s at Batman have a cap a c i t y of 330,000 tons of raw petroleum per year.-1-^ - In-1951+ • the- e x p o r t a t i o n of some of these minerals q 'Prof. Dr. Sanus Burhan Z i h n i , op_. c i t . , V o l . II,. p-. 605. 1 0 A n n u a l Report of the C e n t r a l Bank of the T u r k i s h Republic f o r 1955-, p. 1+1+. 9 provided a considerable amount of f o r e i g n exchange f o r the country.- The. amount of .chromium exported i n .that year was 3 5 6 , 5 6 1 tons and was valued at T.L. J4.3.5 m i l l i o n — e q u i v a l e n t to about l 5 m i l l ! on of United States d o l l a r s at the, o f f i c i a l exchange r a t e of l / 2',.8252' -.. The other-minerals exported i n the same year were copper : 11.,706,. i r o n and ste.el 173,555> and manganese 4 0 , 2 7 3 tons:,, and had a t o t a l , value of T-.L. 2 9 . 2 m i l l i o n In approximately 10 m i l l i o n of United States d o l l a r s . 1 1 c) Pores try. Although Turkey has' r e l a t i v e l y l a r g e and d i v e r s i f i e d forest, resources •, they cannot, as a rule: be p r o f i t a b l y e x p l o i t e d and' the country i s a net importer of f o r e s t prod-ucts . U n t i l very recently., f o r e s t r y techniques -were q u i t e primitive;,, and no attempt was.' made, to introduce: . s c i e n t i f i c : methods of s i l v i c u l t u r e e i t h e r by p r i v a t e owners or by the S t a t e . In many instance valuable stands of timber were burned down i n order t o increase the amount of a g r i c u l t u r a l land . A f t e r World War Two,, the government began the nat-i o n a l i z a t i o n of a l l p r i v a t e f o r e s t s , and has attempted to. put them on a s e l f - s u s t a i n i n g b a s i s . However,, only few processing p l a n t s have been e s t a b l i s h e d and the. experiment i s s t i l l i n i t s infancy. The value of f o r e s t product ^Monthly. Report of the- C e n t r a l Bank o f the. T u r k i s h Republic, No'-. • 5 , May 1955, pp. 81i-85. i m p o r t a t i o n i n 1955 was approximately T.L. 62 m i l l i o n and 12 e x p o r t a t i o n was o n l y T.L. 13 m i l l i o n - F o r e s t r y lias; an 0.67 per cent, share.-, i n the: country's Grass- N a t i o n a l Product 13 according to 1.953 s t a t i s t i c s . d) F i s h e r i e s .Since, the S.econd World War' a s u c c e s s f u l .attempt has-.been made- to modernize .the. p r i m i t i v e T u r k i s h f i s h i n g i n d u s t r y . Turkey, being a country- surrounded by seas., has a wealth of f i s h i n g resources .and even wi t h p r i m i t i v e , f i s h i n g equipment, capture was much more than the- domestic need. Because o f the l a c k of r e f r i g e r a t e d warehouse-s, however-, the surplus had to be thrown back i n t o the sea. Today,, two new. r e f r i g e r a t e d warehouses have been b u i l t in. I s t a n b u l by the State and mod-ern f i s h i n g equipment has been imported from Germany and other European c o u n t r i e s . As.-a result> i n 1955 f i s h e x p o r t a t i o n has a t t a i n e d an ampnnt of lG,iiOO tons, p r o v i d i n g an annual revenue of about T.L. 7 m i l l i o n . ^ According t o the 1953 s t a t i s t i c s , f i s h e r i e s c o n t r i b u t e about 3 per' cent.- share, i n i 5 the. t o t a l Gross' N a t i o n a l Product'. 1 2 M o n t h l y Report of the C e n t r a l Bank of the T u r k i s h Republic, No. 5 , May 1 9 5 5 , pp. 8 5 - 8 7 . "^Prof. Dr. S.anus- Burhan Z i h n i , op_. c i t . , V o l . I I , p.. 6 0 5 . ^Monthly,Report of the C e n t r a l Bank of the T u r k i s h Republic, No. 5, May 1955 , pp. 8i|.-85• ^ P r o f . Dr. S.anus Burhan Z i h n i y op:,, c i t . p . 6 o 5 . -e) Manufacturing and Industry Turkey has a q u i t e w e l l d i v e r s i f i e d manufacturing i n d u s t r y which caters p r i m a r i l y to dome's t i c needs. Per example,, i n the sugar i n d u s t r y t h e r e were- only f o u r l a r g e sugar r e f i n e r i e s i n 195>0,. and since. that time: eleven new ones have e i t h e r been brought i n t o production or are i n process of c o n s t r u c t i o n . Among those r e c e n t l y completed are the Adapazari Sugar Refinery.,, and the Kdnya,. Amasya, Kutahya, Burdur, Susurluk and K a y s e r i p l a n t s . During the f i v e year p e r i o d , from 1950 to 1 9 5 5 , annual sugar' production c a p a c i t y rose- from 1 3 0 , 0 0 0 t o 3 0 0 * 0 0 0 tons. I t Is: estimated that by the end of 1957 the.- amount, of sugar production w i l l have r i s e n to 3 7 6 , 0 0 0 tons per- annum. One of the important .branches- of the manuf ac t u r i n g i n Turkey which a t t a i n e d a considerable progress w i t h i n the l a s t few years Is the- t e x t i l e i n d u s t r y . The e x i s t i n g plants., not being s u f f i c i e n t to meet the i n c r e a s i n g domestic demand>. the government undertook i n 195>0 to e s t a b l i s h a d d i t i o n a l ones and t-o: increase the c a p a c i t y of those already i n operation. With the r e a l i z a t i o n of t h i s program Turkey's t e x t i l e c a p a c i t y w i l l have been increased from 31^ thousand to. one m i l l i o n 17 -Spindle's. 1 The country's most important t e x t i l e plants: are' In the f o l l o w i n g c i t i e s - : Ad aria, Bursa, Her eke >, Istanbul., -^Annual Rep or t .of the C e n t r a l Bank of the T u r k i s h Republic f o r 1 9 5 5 , p. i+1. 1 7Ibid..... pp. I4.2-43.. 12 Isparta,. Izmir-, K a y s e r i , Malatya, and N a z i l l i . New c o n s t r u c t i o n and' economic expansion g e n e r a l l y have g r e a t l y increased the need f o r and output of domestic cement and t h i s i n d u s t r y has experienced a major boom. In the years 191+9 and 195>0 the annual production of the e x i s t -i n g cement p l a n t s was 395,000 tons.' In the f o l l o w i n g years production rose to one m i l l i o n tons. In s p i t e of t h i s i n c r e a s e , however-,- the country has. had to. import h e a v i l y t o keep pace w i t h the r e c o n s t r u e t i o n program. In 1953 •, 537,000 tons were l 8 imported and i n 1951+ the amount was 630,.000 tons. The government has now undertaken the establishment of new p l a n t s at Ankara.,- E s k i s e h l r and' Ad ana which are expected t:a r e l i e v e the country of dependence on f o r e i g n sources of supply. Turkey a l s o has a heavy manufacturing i n d u s t r y . Iron arid s t e e l 'works located at; Karabuk and had a ca p a c i t y of 70,.000 tons of iron, and 61+, 000 tons of s t e e l i n 191+5. 19 Recently, an attempt has been made to. increase these t o t a l s , but the country i s s t i l l dependent on outside sources f o r the major p o r t i o n of i t s 'structural, requirements. Although a breakdown by i n d u s t r y i s not available., i t i s . s i g n i f i c a n t to note that manufacturing i n d u s t r i e s ' accounted f or - 1 2 - 5 .per cent, of the country *'s 1953 Gros's N a t i o n a l 1 8 I b i d .-, p. 1+1. •^Annual^Report of the C e n t r a l Bank of the Turk i s h Republic f o r 1 9 5 5 , p. 1+1-13 20 Product., More recent data would .undoubtedly d i s c l o s e : that t h i s percentage has- been s u b s t a n t i a l l y increased. f ) Trade , an d ..Transport at ion,. Trade ..has- always- .occupied an important place:- i n the country's economy, and the' new i n d u s t r i a l i z a t i o n has served to f u r t h e r enhance i t . While most of i t has been of a p u r e l y domestic nature, s u b s t a n t i a l amounts of tobacco, f r u i t , , cot-ton and g r a i n s are exported. The country a l s o exports chromium and copper. Turkey's main imports are. machinery— a g r i c u l t u r a l and i n d u s t r i a l - - , , i r o n and s t e e l , t e x t i l e goods and sewing cotton, means of t r a n s p o r t a t i o n — v e h i c l e s , p u b l i c buses.,.- cars --and l i q u i d f u e l . In the year of 1955 imports of the country were: valued at T.L. 1,3.61.1. m i l l i o n and 21 exports at' T'..L- 9 0 6 . 8 m i l l i o n . The l e a d i n g customers f o r T u r k i s h exports were the United States: of America,. Germany, the- United Kingdom and I t a l y . I n 1955 the t o t a l value of export to these coun-t r i e s , i n the order l i s t e d above-, were. 1?5> 1 6 9 , 6 8 , and 6 l m i l l i o n T u r k i s h L i r a s . In the same year the. country' s Import from the United States of America was. valued at T.L. 2 8 1 . 5 m i l l i o n , those- from Germany at T.L. 221I.IL m i l l i o n ; and those 22 from the. United Kingdom at T.L... 107-7 m i l l i o n . 2 0 P r o f . Dr. Sanus- Burhan Zihni,. op. cit..., p. 6 o 5 -2 1AnnuaIJReport of the C e n t r a l Bank of the T u r k i s h R e p u b l i c f o r 1 9 5 5 , P- 1+6. 22 Loc. c i t . . 14 In the l a s t few years great progress, has- been made i n the. c o n s t r u c t i o n of highways,, railroad's,, bridges,, and i n the. improvement of harbours, i n or.dor to equip the country .with the. modern means: of .transportation. This: has f u r t h e r enhanced Turkey 1s already enviable geographical p o s i t i o n as a t r a n s i t center between the East and West f o r a i r , sea,, and land t r a n s p o r t a t i o n . As a r e s u l t of the government*s e f f o r t s the l e n g t h of highways has been increased by 27 thousand Kilometers and the roads now under continuous care, have a t o t a l length of 36 thousand Kilometers. Before 19/5>0 the le n g t h of the bridges, was 13,000 meters- and t h e i r number was 289• Today.,, w i t h the help of the new development program.,.-these f i g u r e s have- r i s e n to 5>l4-,.000 meters and the number to 8 8 0 . 2 3 U n t i l 19^0 Turkey rs harbours,, i n c l u d i n g t h a t of I s t a n -bul,, were quite, p r i m i t i v e . Because: of the l a c k .of modern equipment,, the. loading and d i s c h a r g i n g of -cargoes; from ships were v e r y slow and consequently v e r y expensive-. There- was no breakwater and a l l harbours were l e f t to. nature 1 s care:. Since 19^0, however:,. E r e g l i and Trabzon harbours,, which are: the loading p o r t s f o r c o a l , iron,, and s t e e l i n the Black Sea, have been modernized and equipped w i t h e f f i c i e n t l o a d i n g and d i s c h a r g i n g power machines. S i m i l a r improvements have e i t h e r been made, or are., i n p r o c e s s of-completion at Izmir,. 23.1bld'...,-- p. .1+7. 15 Sarrisun, Mersin and Giresun. With them the- c a p a c i t y of l o a d -ing and d i s c h a r g i n g of the country)s e x t e r n a l trade- w i l l have been increased to 5 m i l l i o n tons.per year. Turkey's merchant f l e e t has. lost, much of i t s size, since: the. l a s t years of Ottoman Empire. In those days: i t had one- of the l a r g e s t among the t r a d i n g c o u n t r i e s i n the world. After- the r e v o l u t i o n , the Republican Government took steps to r e b u i l d i t and has succeeded i n extending i t s boundaries w e l l beyond the protected l i m i t s o f the domestic c o a s t a l t r a d e . A f t e r the Second World War T u r k i s h ship's entered the. Mediter-ranean trade,, and today has also: a modern passenger f l e e t operating between the Mediterranean p o r t s . In 1954- "the ton-25 nage of the country's merchant f l e e t was up to 595,000. .Since the Second. World War,, considerable- progress has a l s o .been made i n the development of the country's, a i r t r a n s -p o r t a t i o n system. Before- the. war only i n t r a - n a t i o n a l f l i g h t s were undertaken and the a i r f l e e t consisted of only e-ight. planes. By 1955 the number of planes had been increased to l6,- the system, had .become, i n t e r n a t i o n a l i n character- and modern landing f i e l d s had been constructed at Istanbul,. 26 Ankara.and Adana. In considerable contrast t o the 879 •^Annual .Report of the. C e n t r a l Bank of the T u r k i s h Republic f o r 1955, p. 4 8 . 2 % b i d . , p. I4.9 2%orithly,.Repo Republic,. Wo. 5 , May, 1956.,. p. 96 r t of the C e n t r a l Bank o f the T u r k i s h 16 passengers and 9Q tons of merchandise transported i n 1938., the. system, transported 1 7 5 , 6 8 5 passengers and 2 , 1 6 5 tons of f r e i g h t i n 1 9 5 5 • 2 7 In 1953 trade: .and t r a n s p o r t a t i o n contributed 14-3 per-28 cent. of the. country's t o t a l Gross* N a t i o n a l Product. g) Finance. In view of the f a c t that, t h i s t h e s i s i s mainly con-cerned w i t h the o r i g i n and development of the Turkish banking system no attempt has. been made: to d e t a i l i t s progress here... However,, t h i s ' p r e l i m i n a r y survey would h a r d l y be complete without, noting that the- Country'-s f i n a n c i a l I n s t i t u t i o n s have: g r e a t l y increased both i n s i z e and d i v e r s i t y s i n c e the 1923 R e v o l u t i o n . Whereas i n 1921]. there were only 19 banks and 332 branches,,, there are now 55 banks and 1 ,215 branches. Meanwhile, t h e i r : aggregate' pa i d i n c a p i t a l and reserves have" increased from T.L. 2 2 . 1 m i l l i o n i n 1944 to T.L. 1 , 6 8 6 . 2 m i l l i o n , i n 1955 . Of the banks- now In operation, 4 4 are private; enterprises, and' c a r r y on general, .banking businesses, 11 are: state: owned .and engage- f o r the. m6:& p a r t in. .quasi-p u b l i c e n t e r p r i s e s . At the head of these i n s t i t u t i o n s i s the C e n t r a l Bank df the T u r k i s h Republic which, was estab-l i s h e d i n 1931 and now. has Complete c o n t r o l of the i s s u e of p. 605. 2 7 I b i d . . , p. 4 9 -2 8 P r o f . Dr. Sanus Burhan Zihni,, o£. c i t . . . V o l . I I , currency and the q u a n t i t y of c r e d i t . Insurance' .businesses have. not. yet progressed as f a r i n Turkey as i t has i n the Western World. Even though every branch of insurance i s represented-, the p u b l i c i s not yet s u f f i c i e n t l y aware of the value of the types of coverage off e r e d to a v a i l themselves of I t . Some idea.-of the volume of the country's insurance t r a n s a c t i o n s may be gained from the f a c t that i n 191+9, t o t a l reserves amounted to T.L. 1+6.3 m i l l i o n , , premium's received were- T.L. 13 . 8 m i l l i o n , , and the 2 9 paid .benefits were T.L. $ m i l l i o n . 3 • National. Income .by Sources The nature and context of the T u r k i s h economy i s revealed i n Table I I (see page 18) i n which the country's income has been d i s t r i b u t e d by sources. Here i t w i l l be seen that a g r i c u l t u r e , f o r e s t r y , and f i s h e r i e s c o n s t i t u t e 52 .3 per cent. of the t o t a l Nat-i o n a l Income; trade, t r a n s p o r t a t i o n , f i n a n c e , insurance,, and private, enterprises,. 2 1 . 0 per cent.; manufacturing, c o n s t r u c t i o n , mining and p u b l i c u t i l i t i e s . l 5 « 8 per cent.; S t a t e s e r v i c e s 7-9 per cent.; and r e a l e s t ate incomes 3 . 0 per cent. While: the country has: experienced considerable Prof. Dr. Sanus Burhan Zlhni.,. op. c i t . , p. 6o5-18 TABLE I I NATIONAL INCOME OF TURKEY BY MAJOR PRODUCTION SOURCES, YEARS 1938, 1911-8, 1953* • ( i n m i l l i o n T.L.) Sources- 1938 1948 1953 A g r i c u l t u r e , F o r e s t r y and F i s h e r y 7 9 2 . 1 4 , 3 3 5 , 4 7 , 2 8 4 . 8 Manuf a c t u r i n g , C o n s t r u c t i o n Mining and Public- U t i l i t i e s 2 5 2 . 9 1 , 0 6 8 . 4 2 , 2 0 2 . 1 Trade, Transport at ion,. Finanee, Insurance,. and P r i v a t e E n t e r p r i s e s 3 5 0 - 4 l , 5 l 6 . 3 2 , 9 2 9 . 3 Real Estate. Incomes 9 0 . 7 2 8 3 . 8 38.6.7 State Services 157..1 .. 8 0 3 . 0 11110.5 N a t i o n a l Income- 1 ,640. .2 8 , 0 0 7 - 9 13>913.4 E x t e r n a l Incomes 13-7 5 6 . 0 3 0 . 0 I n d i r e c t Taxes and D e p r e c i a t i o n . 3 2 5 . 6 1 , 2 5 4 . 7 2 , 4 3 7 . 9 Gross N a t i o n a l . - Product . 1 , 9 5 2 . 1 9 , 2 0 6 . 6 1 6 , 3 2 0 . 9 '""Prof. Dr. Sanus- Burhan Z i h n i , op_. c i t . , . V o l . I I , . p. 6 0 5 . i n f l a t i o n since the beginning of the war.,, a comparison i n terms of L i r a of .constant purchasing power- s t i l l reve.als a n e a r l y two f o l d increase, i n the Gross N a t i o n a l Product since: 1 9 4 8 . The d e t a i l s are given i n tabular- form Immediately below.. 19 TABLE. I l l REAL GROWTH OP GROSS NATIONAL PRODUCT OP TURKEY, 1938-1953 Price: G.N.P. Real Growth Years'. . , ,. , Index.. , . ..Index ,• -,.„• . Index . 1938 100 1.0.0 100 191+8 1+66 .24.70 1 0 0 . 8 1953 1+97 825 166 With a po p u l a t i o n estimated 2 2 . 7 m i l l i o n i n 1953> per c a p i t a income was 718 T u r k i s h L i r a which i s equivalent to 25I+ United State's dollars'. This l a t t e r sum i s only about 2 0 per cent., of the. per c a p i t a income i n the United States of America. But s t i l l comparison can be made f a v o r -ably w i t h the per .capita incomes of the people i n the neighbouring c o u n t r i e s . 1+) P u b l i c P o l i c y Before the assumption of power by Kemal At.at.urk i n 1923,. Turkey f o r cent u r i e s had l i v e d close to the land,. i n what could b.e ch a r a c t e r i z e d an economy o f s e l f - s u f f i c i e n t i n d i v i d u a l s . Methods of farming" and manufacturing were by Western standards: q u i t e p r i m i t i v e and the. country had not yet experienced an i n d u s t r i a l r e v o l u t i o n . The country had very l i t t l e c a p i t a l equipment, i t s . l a r g e p o t e n t i a l n a t u r a l energy i n the form o f water resources were, untouched and l i t t l e had been done by the way of e x p l o i t i n g the land mineral resources. 20 Kemal Ataturk envisioned a more prosperous" and s e l f -s u f f i c i e n t Turkey and undertook i t s immediate r e v o l u t i o n . Under h i s l e a d e r s h i p , a modernization movement, both s o c i a l and economic,, was s t a r t e d i n the country almost a hundred years a f t e r i t had been accomplished i n the Western World g e n e r a l l y . To close the gap that, e x i s t e d between the West-ern Countries and Turkey,, a s e r i e s of f i v e year i n d u s t r i a l -i z a t i o n plans were worked out and put i n t o o peration. They included the- e x p l o i t a t i o n of the. country's m i n e r a l resources, the establishment of new textile.- plants.,, sugar r e f i n e r i e s , and a new cement i n d u s t r y , a l l of which have already been noted. In the course- of t h i s development some p r i v a t e c o a l and copper operations- were n a t i o n a l i z e d and the new s t e e l p l a n t was e s t a b l i s h e d at Karabuk. The government also under-took to reform the Turkish banking system and e s t a b l i s h e d new-banking i n s t i t u t i o n s - designed to meet: the- f i n a n c i a l needs: of the country. Of those p a r t i c u l a r reforms p e r t i n e n t d e t a i l s are given i n the chapters which f o l l o w . Because of the outbreak of the, .Second World War:,, Kemal Ataturk* s r e v o l u t i o n a r y modernization p o l i c y had to be i n t e r r u p t e d s h o r t l y a f t e r his- death i n 1938> and was not again resumed u n t i l a few years a f t e r the Second World War-. In 19^0, w i t h the assumption of power by the- Democratic Party the modernization program was undertaken w i t h renewed vigor-and w i t h noteworthy results., seme o f which have: .already been stated above. In order to finance this- i n d u s t r i a l development 2 1 act,, the government made use of both domestic and f o r e i g n c a p i t a l . M a r s h a l l Plan a i d was one of the sources of the-l a t t e r - , and from 191+8 to 1955,. both d i r e c t and i n d i r e c t f i n a n c i n g came from t h i s source. A i d was a l s o received from Economic Cooperation Administration,, Mutual S e c u r i t y A d m i n i s t r a t i o n , and For e i g n Operation A d m i n i s t r a t i o n . In a l l , , 601 m i l l i o n United States d o l l a r s were- provided by 30 these, o r g a n i z a t i o n s . Direct, loans have been made to f a r -mers f o r the purchase of modern labour- saving equipment and to government f o r the c o n s t r u c t i o n of highways and a i r ' f i e l d s . I n d i r e c t aid has taken on the form of t e c h n i c a l a s s i s t a n c e and d i r e c t i o n by teams of experts from abroad. Loans have, a l s o been negotiated w i t h the I n t e r n a t i o n a l Bank f o r Reconstruction and Development f o r the c o n s t r u c t i o n of h y d r o e l e c t r i c power p l a n t s , harbours, and e l e v a t o r s . The newly found I n d u s t r i a l Development Bank of Turkey, of which more w i l l be said l a t e r on, was the agency through which some, of these, funds were: made- available- to private, enter-p r i s e s . The t o t a l amount of loans provided by th i s ' bank as of December, 1951+,- was' 63.1+ m i l l i o n United .States d o l l a r s . -^Monthly Report of the C e n t r a l Bank of the- T u r k i s h Republic,. No. 5 , May, 1956, p. 9l+. 3 1 I b l d . , p. .62. CHAPTER I I ANTECEDENT MONEY AND. BANKING INSTITUTIONS The h i s t o r y of the Turks begins w i t h the S e l j u k s who were- one. of the dynastie.s r u l i n g over Western A s i a from the- eleventh to the- thirteenth- c e n t u r i e s . The Otto-man Empire- was made up of those dynasties under- the leader-ship of powerful Fat i n "Sultan Mehmet. Constantinople- was conquered i n ll|.53 and t h e r e a f t e r the Ottoman Empire became, the world's l e a d i n g Middle Eastern power. This l e a d e r s h i p continued f o r some, .two c e n t u r i e s but. i n t e r n e c i n e s t r i f e among the- r u l e r s themselves- and continued Balkan Wars ev e n t u a l l y undermined the. strength and c r e d i t of the .central government. F o r a time during the late, nine:teenth and e a r l y t w e n t i e t h c e n t u r i e s the country became a pawn i n the power p o l i t i c s of the- l e a d i n g Western c o u n t r i e s , p a r t i c u l a r l y the United Kingdom and Prance.. The- modern Turkey of today i s but a r e l a t i v e l y s m a l l p a r t of an empire which once-stretched from the Caspian Sea to the N i l e and from Vienna to Bagdad. L i t t l e i s known about the c h a r a c t e r of the e a r l y banking businesses, of Turkey., but one. may. surmise that there were both e a r l y money lenders and t r a d e r s who: transacted 22. .banking business along w i t h t h e i r t r a d i n g a c t i v i t i e s . The f i r s t formal bank was not e s t a b l i s h e d u n t i l I8I4.7, but ' the country has a system of coinage which goes back to. the t h i r t e e n t h century. D e t a i l s of i t s - development and changing content are as f o l l o w s . 1. E a r l y .Coinage In a l l the e a r l y Near-East c o u n t r i e s the p r e r o g a t i v e of coinage or of p r o v i d i n g a medium of payments f o r domestic use. was exercised by the c h i e f o f the State- or Emperor. However, i t i s s a i d that Osman Gazi,. the. f i r s t S e l j u k Khan was an exception to- t h i s ' rule.^" During h i s r e i g n some coins were minted but none of them bore. his. i n s c r i p t i o n . Most of the coins' i n c i r c u l a t i o n , both s i l v e r and gold, were of f o r -p eign o r i g i n . The f i r s t c o i n , bearing both the name and the image of the r u l e r was minted i n 1313 at Bursa under the d i r e c t i o n -of the Prime M i n i s t e r Alaaddin Pasha during the 3 r e i g n of Khan Orhan Gazi. a) S i l v e r Coins The co i n minted i n 1313 at Bursa was of s i l v e r and was known as the Akca which, i n T u r k i s h , means White Money. The Akca was a l s o known .as A k c a - i - Osmani or s i m p l y as Osmani meaning Ottoman. The f i n e n e s s of Akca was 90 per cent., and the weight was 6 carat's, about 18.5 g r a i n s ; I p r o f . Dr. Sanus Burhan Z i h n i , Para Economisi^ I s t a n b u l , 19^6, V o l . I.,, p. 2LL1L. 2 I b l d . , p. 21|1L. • 3 I b i d . , p. 2i|5. 2\ almost as l a r g e as the o r i g i n a l B r i t i s h s i l v e r penny (2I4. grains) . A u t h o r i t i e s c l a i m that s'ome two- and ten Akca coins were al s o minted during t h i s e a r l y p e r i o d . The f o r -eign .coins which were, i n c i r c u l a t i o n were g e n e r a l l y known as Kurus which, i n T u r k i s h , means S i l v e r Coin. But: since:, some: of the f o r e i g n coins, were also of gold,, they were d i s -tinguished by the de'signating of the . s i l v e r as White Kurus and the gold as Red Kurus A As a r e s u l t , of repeated a d u l t e r a t i o n s , the Akca was so depreciated i n value by 1623, that i t became necessary to mint a new copper c o i n known as. the Para. One para was equal to three Akca at the beginning. Although these domestic coins were l e g a l tender, the f u l l bodied f o r e i g n c o i n s , e s p e c i a l l y the. German T a l e r , were p r e f e r r e d by the p u b l i c and steps" were e v e n t u a l l y taken i n l681| to c o i n a 6 domestic Kurus of s i m i l a r , s i z e and f i n e n e s s . The domestie Kurus was equal to 1+0 Para and to. 120 Akca and o r i g i n a l l y weighed i n excess" of g r a i n s . At a somewhat late r - date I t s name was" .changed to a. Z o l t e . Apparently this" coin was also, subsequently c l i p p e d and adulterated and e v e n t u a l l y a new and heavier' Kurus was minted. The l a t t e r c o i n u l t i m a t e l y took the place of Akca and became the- country's money of ^Prof.. Dr. Sanus Burhan Z i h n i , dp.. ...cit.-, pp. 2l|;?-i|.6. ^ I b i d . , p. 2 4 7 • ' ^Loc. c i t . 25 account. I t stayed i n c i r c u l a t i o n u n t i l 1 9 2 3 and by that date i t was replaced by the T u r k i s h L i r a which was e q u a l l y minted i n Turkey i n I8I4.O as f i r s t of gold.? b) Gold Coins Gold c o i n s , c i r c u l a t i n g e a r l y i n the- country, were e n t i r e l y f o r e i g n . For the most part they were of Venetian and Hungarian o r i g i n and were c o l l e c t i v e l y known as F l o r i . In order to r e g i s t e r f o r e i g n currencies f o r domestic c i r -c u l a t i o n a mark, known as Sah, was impressed upon them. In I I 4 . 3 2 , by decree, S u l t a n F a t l h Mehmet minted the f i r s t Ottoman gold c o i n . These coins were named according t o the various. r u l i n g dynasties and the places where the minting process 8 was c a r r i e d out. Some were known simply as Y a l d i z ' A l t i n -• G i l d Gold, others K i z i l Kurus - Red Kurus. and F l o r i . The names E s r e f i and S e r i f i , meaning eminent, were a l s o applied to them. The f i n e n e s s of the f i r s t gold c o i n was 9 9 - 3 per cent, and the weight was 1 7 ^ carat or about 5 3 . 0 9 g r a i n s . These gold coins c i r c u l a t e d i n the country^.until I8I4.O without any a l t e r a t i o n i n t h e i r fineness and weights. However, i n the l a t t e r year, Sultan Abdulmeeit reduced t h e i r fineness to 9 1 6 . 2 / 3 per thousand and increased t h e i r 7 'Prof. Dr. Sanus Burham Z i h n i , op_. c i t . , p. 2I4.7 . 8 I b i d . , p. .224.8. ^Loc. c i t . •weight to 7 .21657 grams which was about 111 .3 g r a i n s . The name Re.sadiye or Gold L i r a was given to t h i s new gold -coin and provides the present day d e s c r i p t i o n of the T u r k i s h money of account. A new gold c o i n was minted by the Republic' but was never put i n t o c i r c u l a t i o n . This gold c o i n was known as the Republican Gold L i r a and weighed H I . 3 grainsj the same as the Ottoman Gold L i r a . c) Copper Coins As already noted i n reference to the Para copper .coins were a l s o common i n the. T u r k i s h money system. The most f a m i l i a r cn e was. known as Mangir. O r i g i n a l l y , . Mangir was minted as a component of an Akca and was one-eighth i t s value. But as the Akca reduced i n weight and f i n e n e s s , the two coins became equal i n value and were exchanged on one-•u • 12 for-one basis.. 2 . P r i n t e d M o n e y T r e a s u r y Notes The f i r s t experiments w i t h the paper money i n Turkey were made by the. private, organizations during the second quarter of the nineteenth century. The chronic shortage, of coins r e s u l t e d i n the i s s u i n g of some paper notesj stamps, and t i n tokens, redeemable, i n merchandise,, and these: media 13 forced • t h e i r way .into, the. general c i r c u l a t i o n . 1 0 P r o f . Dr. Sanus Burhan Zihni,. OJJ. c i t . . , p. 2\\9. ^ M o n t h l y Report of the C e n t r a l Bank of the T u r k i s h Republic* No. 5 , May,. 1956,. p, 61+. 1 2-Prof. Dr.. Sanus Burhan Z i h n i , op_:. c i t . , p. 2.1+Q. 1 3 I b i d ., p. 2 5 1 , In 181+0 the government i t s e l f was obliged to r e s o r t to the paper money experiments i n the- form of Treasury Notes i n order to meet a f i s c a l emergency brought about by the: war with R u s s i a and uprisings' w i t h i n the f a r f l u n g Empire i t s e l f , p a r t i c u l a r l y i n Egypt and Greece. As a b.eginning, S u l t a n Abdulmecit issued some T.L. 1+00,000 promissory notes, bearing 8 per cent, interest,., i n denominations' of 50, , 100., 2 0 0 , and 500 Kurus,. which only c i r c u l a t e d i n I s t a n b u l . ^ Later on, i n l 8 5 l , a r e g u l a r non-i n t e r e s t bearing government note was issued. By .1861.,.. the amount outstanding had risen, to about. T.L. 1 2 . 5 m i l l i o n and 15 depreciated -considerably i n value. I n fact,;- the exchange-rat e on Gold L i r a had r i s e n from 250 to 350 Kurus i n the same year. In order to reform the currency,, the Ottoman .Government secured a f i v e m i l l i o n S t e r l i n g l o an from Great B r i t a i n and used i t s proceeds to- acquire: an equivalent amount of s i l v e r and other money metals. I t a l s o e n l i s t e d the help of the f o r e i g n owned Bank of Ottoman i n g e t t i n g the redundant paper-money out of c i r c u l a t i o n . The l a t t e r I n s t i t u t i o n loaned the Ottoman Government T.L. 8 . 8 m i l l i o n i n gold on government bond s e c u r i t y . However.,., the. purchase p r i c e of the bonds was 68 per cent, of par and they .bore i n t e r e s t at 6 per cent. In- a d d i t i o n the Bank of Ottoman' was granted the p r i v i l e g e - of I s s u i n g - I t s • own-paper-notes to the extent, o f i t s s u b s c r i p t i o n l^-Prof. Dr. Sanus. Burhan Zihni,. op . c i t . , p. 1+81+,. V o l . I I I . 1 % b i d . . , . pp.. 1+81+-1+85• 28 to the bonds. The- proceeds of the sale to the Bank of •Ottoman,- plus the S t e r l i n g c r e d i t , made- p o s s i b l e the redemp-t i o n of the outstanding' Treasury i s s u e s . In a l l , , t e n m i l l i o n T u r k i s h L i r a s of government notes 'were redeemed i n the manner shown i n the f o l l o w i n g • t a b l e . TABLE IV TREASURY NOTE REDEMPTION OP 1863" .. Method of payment Amount of Payment .... i n T.L. -Government Bonds 6, 001+, 923. S i l v e r - C o i n s (Mecidiye) 836,136. Gold (Ottoman, E n g l i s h and French) 3,0.31,-737. B i l l s of Exchange, drawn on London and P a r i s .127,2014.. ...... T o t a l 10,000,000 ... """Prof. Dr. 'S.anus- Burhan Z i h n i , op. c i t . , p. I4 .87. In I876. i n order to meet the f i s c a l emergency 'caused.;, by the. war w i t h Russia.,, another experiment w i t h paper money was undertaken,, t h i s time by Sultan Murat the Vth j o i n t l y ' with the- Bank of Ottoman. In August of that y e a r T.L. 3 m i l l i o n of government notes, bearing the sign a t u r e s of both the M i n i s t r y of Finance and the- o f f i c i a l of the Bank of Ottoman,., were issued and' paid out. The emission was f u r t h e r Prof. Dr. Sanus Burhan Z i h n i , op_. cit , . p. I4 . 8 7 . 29 guaranteed by a pledge of the revenues from the State owned copper, chromium mines, and of other State undertakings. These notes were l e g a l tender, except i n H i c a z , Yemen and T r i p o l i . W i t h i n three years the amount had increased to T.L. 16 m i l l i o n , and had become p r a c t i c a l l y worthless. They were u l t i m a t e l y repudiated by both the government and the bank. By that time the value of one Gold L i r a had r i s e n to 1+^0 s i l v e r K u r u s . 1 7 During the F i r s t World War the government again found i t necessary to: have- recourse to an i n c o n v e r t i b l e paper money and d i d so with the help of f o r e i g n bonds, p a r t i -c u l a r l y from G e r m a n y . T h e f i r s t emission t o t a l l i n g some T.L. 6.6 m i l l i o n was based on s e c u r i t i e s supplied by the German and Hungarian Governments.. Subsequent issues were backed wholly by the I m p e r i a l German Government bonds f o r which the T u r k i s h Government was held l i a b l e as a. borrower. Meanwhile, the s u b s t a n t i a l gold reserves of the T u r k i s h Trea-sury were t r a n s f e r r e d to B e r l i n and Vienna, where, e v e n t u a l l y , under the pro-vision of the- T r e a t i e s of V e r s a i l l e s and St. Germalhe, they became the possessions of the v i c t o r i o u s A l l i e d Powers. .Before the Issue process had run i t s f u l l course, about T.L. l59 m i l l i o n of these notes were outstanding. The l i a b i l i t y of these outstanding notes was u l t i m a t e l y t r a n s f e r r e d to- the newly founded C e n t r a l Bank of the 1 7 P r o f . Dr. Sanus Burhan Z i h n i , ,op. c i t . , p. 58.7. 1 8 I b i d . , p-4 1+91+. 30 T u r k i s h Republic i n 1931. I t goes without saying, :of course,., that t h i s i n f l a -t i o n a r y increase i n the amount of paper money brought about a r i s e i n prices.. The- government i t s e l f sought r e l i e f by o f f e r i n g bonds to the i n v e s t i n g public,, but as might have been expected, there were few,, i f any, taken. There were als o misgivings as to the u l t i m a t e success of the j o i n t venture, w i t h Germany and d e c l i n i n g confidence- i n the Turk-i s h Government i t s e l f . At the same time the economic con-d i t i o n of the country was- most u n s a t i s f a c t o r y ; there: was not enough domestic production, and no export surplus. Moreover-, an army had t o be. supported and maintained i n the f i e l d , and i t i s d o u b t f u l i f orthodox measures e q u i -v a l e n t i n e f f e c t to the i n f l a t i o n , would have been t o l e r -ated by the people. Although no -complete p r i c e indexes are a v a i l a b l e to show the d e p r e c i a t i o n i n the value of the country's currency, i t can p a r t l y be shown by the paper value of the Ottoman Gold L i r a . I t rose from 101 Kurus i n 19lp t o 777 Kurus i n 1923- D e t a i l s are given i n Table V (see page 3 1 ) . 3 • Monetary .Standard's As" revealed .by the foregoing discussion,. Turkey has,, during i t s long history., experimented p r a c t i c a l l y w i t h a l l of the- monetary standards recognized as such by monetary t h e o r i s t s , i.e.,. monometalism,. bimetalism,. gold b u l l i o n and paper. 31 TABLE V PAPER VALUE- OP OTTOMAN GOLD LIRA 191p to - 1923 . - -Years P r i c e (Kurus) Years P r i c e (Kurus) 1915 101 1921 549 1916 131 1922 1917 352 1923 777 1918 472 1919 kko 1920 520 *;:"Prof. Dr. .Sanus Burhan Z i h n i , op. c i t ; , . p. 1|95> • a.) . Mo-nome t a l i sm For more than f i v e c e n t u r i e s , after- the e s t a b l i s h -ment of the Ottoman Empire u n t i l the reform of Abdulmecit i n l8 i j .0 , s i l v e r provided the p r i n c i p a l p a r t of the country* s currency. The. s i l v e r Akca o r i g i n a l l y weighing 6 carats was the standard c o i n , but by 1 8 4 0 , when, i t was f i n a l l y abandoned, i t s weight had been reduced to one-half c a r a t . The h i s t o r y of t h i s d e p r e c i a t i o n i s given i n the ta b l e on page 3 2 . b) Bimetalism With the assumption of power by Sultan Abdulmecit i n I8J4.O an attempt was made- to reorganize the .country's currency. For that purpose several^ I m p e r i a l E d i c t s were 32 TABLE. VI SUMMARY OP THE DEPRECIATION OP AKCA I913 - I 8 1 8 . * The Names of Sultans Years Weight Fineness Orhan-Murat I I 1313-1432- 6 (19 . 2 gr) "90 P a t i h Mehmet 1432-1470 5 ( 1 5 . 4 gr) 90 B e y a z i t I I 1470-1502 4 ( 1 2 . 3 gr) 85 Selim I arid Suleyraan 1^02.-1^68 3 1/2 ( 1 0 . 8 gr) 85 Selim I I and Murat I I I 1568-1586 3 1/4 ( 1 0 . 0 gr) 85 Murat I I and Mehmet I I I 1586-1603 3 ( 9 . 3 gr) 85 Last Years of Mehmet I I I 1603-1606 2 ( 6 . 1 gr) 85 Ahmet I and Orhan I I 1606-1626 .1 1/2 ( 4 - 6 gr ) .80 Murat IV and Ibrahim 1626-1652 1 1/4 ( 3 . 9 gr) 75 Mehmet IV 1652-1693 1 1/4 .( 3 . 9 ' gr) 50 Suleyman. I I and Mustafa I I 1693-1709 3/4 ( 2 . 3 gr) 70 Ahmet I I I and Osman I I I 1709-1765 1 ( 3 . 1 gr) .68 Mustafa I I I 1765-1772 1 ( 3 . 1 gr) 60 • • Hamit I 1772-1787 3/4 ( 2 . 3 gr) 4 6 Selim I I I and ..; Mahmut. I I , -, ;v- ... .1787-1818 1/2 ( 1.5 gr) 46 """Prof. Dr. Sanus Burhan Z i h n i , .op;, c i t . V o l . I,, pp. 245-246. i s s u e d . The Fermanl A l i - Im p e r i a l E d i c t of 181+0, provided f o r the f r e e coinage of both gold and s i l v e r and was the 19 country's f i r s t experiment with a B i m e t a l i c Standard. Although no seniorage was exacted, the e d i c t provided that a l l expenses,,, i n c i d e n t to the coinage process,: were to be paid by the owners of the b u l l i o n . The fin e n e s s of the gold coins was f i x e d at 91.67 per cent, and t h e i r weight at 7ji-2l65>7 grams., about 111,3 g r a i n s . The fi n e n e s s of s i l v e r coin was f i r s t f i x e d at 90 per cent, but l a t e r reduced to 83 per cent. Its- weight was f i x e d at 22,l+5l5> grams, about 20 3l4.6-.lL6. g r a i n s . Since, the. weight r a t i o between the gold and s i l v e r coins was approximately 1 to 3» and the precious metals then .sold In the world markets at about 15" to 1, i t may be assumed that they exchanged i n the t o t a l of $ to 1 r a t i o . This E d i c t provided t h a t a l l coins i n c i r c u l a t i o n , , f o r e i g n as w e l l as domestic, should be melted down and re-coined i n the new denominations, and that others' of ques-tionable- value should be discarded. I t also provided f o r 21 the importation of new minting machines: from London. The o b j e c t i v e s of the. new monetary measures, were explained to the p u b l i c i n the Meskukat Be.yannamesi - A 1 9 P r o f . P r . Sanus Burhan Z i h n i , op_.- c i t . , . V o l . I , p. 21+9. 2 0 I b l d . , pp. 21+9-250. 2 1 I b l d . , p. 250. 31+ Coinage: Manifesto: which was issued i n 18I+I+. In t h i s mani-f e s t o the d e f i n i t i o n of Coin was given as: " i n the world f o r a f i x e d amount of gold and s i l v e r metal a value is. designated and then d i v i d e d i n t o s e v e r a l p i e c e s . Coin i s the name of one of these pieces and has a value according 22 to i t s . weight." In another-Edict known as the Meskukati Cedideyi Osmaniye Hakkinda T a r i f e - T a r i f f About the New Ottoman 23 Currencies.,, issued i n the same year. ^ I t was decreed that, the process of minting as w e l l as the p r e r o g a t i v e belongs only to the government and every person who wanted to convert gold and s i l v e r b u l l i o n to: the c o i n counterpart, had to b r i n g them to the government minting i n s t i t u t i o n . The weight of the minted gold coins\ could not vary by more- than 0.2 per cent, from t h e i r d e s c r i p t i o n s , or "face" v a l u e s ; those of pi s i l v e r coins,, by not more than 0 . 3 per cent. ^ Although a b i m e t a l i e standard had been authorized i n 181+0, i t did not n e c e s s a r i l y f o l l o w that i t could be-implemented without d i f f i c u l t y . By 1873 the values of s i l -ver had f a l l e n so much that gold coins began to disappear from the c i r c u l a t i o n . Some shrewd operators s t a r t e d to import, s i l v e r b u l l i o n from outside- the country.,, then traded 2 2 Prof. Dr. Sanus Burhan Z i h n i , op-... c i t . , V o l . I.,. p. .2^0. 2 3 I b i d . , p. 2^0. i t s coined counterpart f o r the- more valuable gold.,, thus-widening the- breach which already e x i s t e d between them i n the minds of the p u b l i c . In order to maintain a c i r c u l a -t i o n of gold coins., and stop t h i s exercise, of the m i n t i n g privilege-,, the government f i n a l l y decided to stop the c o i n -age of s i l v e r a l t o g e t h e r . Howeverj t h i s did not increase the c i r c u l a t i o n of the .undervalued gold. Meanwhile,,, the s i t u a t i o n was. f u r t h e r complicated by the war between Russia and Ottoman- Empire, and the exchange- rate- on even the Gold L i r a began t o d e c l i n e . However,, no steps were- taken to adjust the s i t u a t i o n u n t i l the adoption of the: Gold B u l l i o n Standard i n 1916. °) Gold B u l l i o n . .Standard On A p r i l 191.6.,. under the p r o v i s i o n of the Te.vhidi Meskukat Kanunu - U n i f i c a t i o n of Coinage Act - a Gold B u l -2$ l i o n Standard was adopted by the Country. However,., being i n the F i r s t World War> and .short of both precious- metals and f o r e i g n c r e d i t , the country was unable to implement i t . Instead i t was f o r c e d to. r e s o r t to a f i a t paper currency which remained i n c i r c u l a t i o n u n t i l the establishment of the C e n t r a l Bank of the T u r k i s h Republic i n 1931. D e t a i l e d information on the monetary p o l i c y of the Turkish Republic a f t e r t h i s date i s given i n Chapter- V. -^Prof. Dr. Sanus Burhan Z i h n i , . op. c i t . , V o l . I , p. 2^2. CHAPTER I I I ANTECEDENT MONEY AND BANKING INSTITUTIONS (Continued) U n t i l the second h a l f of the nineteenth century, Turkey>. i n common with the other Near-Eastern countries,, had no formal banking I n s t i t u t i o n s . I t s modest banking needs were supplied f o r the most p a r t by Jews, Armenians, Levantines and F o r e i g n e r s . G e n e r a l l y speaking,, t h e i r p r i n c i p a l under-takings consisted of dealings with the Government and the f i n a n c i n g of the country's commercial and I n d u s t r i a l i n s t i t u -tions,., e s p e c i a l l y in. the r a i l w a y and mining f i e l d s . However,, not u n t i l the l a t t e r - part of the nineteenth century were steps taken to encourage the development of the p u r e l y domes-t i c e n t e r p r i s e s . 1 . The, F i r s t Money Lenders Before the establishment of the f i r s t formal bank, banking businesses were c a r r i e d on by the p r i v a t e Money Lenders and Money Brokers. The: l a t t e r - go - back .to' the fourteenth century. During the. e a r l y period*, much of t h e i r business consisted of assaying and exchanging the money and diverse coins which c i r c u l a t e d throughout the- Ottoman Empire:. Persons engaged i n t h i s kind of business were known as Sarraf i n T u r k i s h , and consisted mostly., of Jews, Armenians and Levantines. Although t h e i r p r i n c i p a l business consisted of 36 dealing i n money, they a l s o made loans, accepted d e p o s i t s , and discounted and c o l l e c t e d b i l l s of exchange. On occasion they a l s o granted c r e d i t to the government against a deposit of i t s bonds. Some of these e a r l y i n f o r m a l e n t e r p r i s e s became so important that t h e i r p r i n c i p a l s became- known as Bankers. Among them the G a l a t a Bankers were the most famous. The designation G a l a t a i d e n t i f i e s them w i t h the great business' d i s t r i c t i n I s t a n b u l c a l l e d The- Galata.- 1 2. F i r s t Formal Bank, The f i r s t formal banking i n s t i t u t i o n was e s t a b l i s h e d i n Turkey i n 181+7 during the r e i g n of Sultan Abdulmecld. I t came i n t o existence- i n response to the government's need f o r f i n a n c i a l assistance, and was r e l a t i v e l y short l i v e d . a) J . A l l e o n and Th. B a l t a z z l and the F i r s t Domestic.Bank As mentioned i n the previous chapter-, the paper money f i r s t issued i n 181+0 declined r a p i d l y i n value and t h i s d e c l i n e was accompanied by a sympathetic downward movement i n the p r i c e ' offered even f o r Gold L i r a i n the exchange, mar-kets of Western Europe-. In order to maintain T u r k i s h purchas-ing power abroad, the Ottoman Government, i n I8J4.5,, made an arrangement w i t h two well-known bankers, J . A l l e o n and Th. B a l t a z z l , i n which the l a t t e r were to receive, two m i l l i o n •'-Prof. Kuyucak Haz.im A t i f , , Para ve Banka-, V o l . I I , Istanbul,. 191+8, p.- 152. Kurus per year i n r e t u r n f o r t h e i r ' guarantee to hold the 2 Kurus to 110 per Pound S t e r l i n g . Presumably these bankers acted as a modern Foreign Exchange C o n t r o l Board, having e x c l u s i v e access to a l l but-going b i l l s and e x e r c i s i n g the r i g h t to l i m i t access to- the f o r e i g n funds thus obtained. The attempt appears to have worked w e l l and the arrangement was renewed f o r an a d d i t i o n a l year, and e v e n t u a l l y i n I8I4.7 these- operations were t r a n s f e r r e d to a formal banking i n s t i t u t i o n known as. the I s t a n b u l Bankasi — The Bank of Constantinople. At f i r s t the bank had no c a p i t a l , , but because of the good standing of I t s owners was able to a t t r a c t domestic business, and maintain the: value of the. country's currency abroad as i t was, demanded. D i f f i c u l t i e s arose on numerous occasions,, e i t h e r In r e f i n a n c i n g or i n t a k i n g up i t s f o r e i g n obligations,, but the. bank managed to weather each c r i s i s and be able to keep- the exchange r a t e of 110 Kurus to the Pound S t e r l i n g u n t i l lQ$2.^ However, the experiment was doomed to eventual f a i l u r e f o r the. government continued to expand i t s uncovered currency issue and thus to complicate the d e l i -c a t e l y balanced undertaking'. There- e v e n t u a l l y came, a time where exporters refused to s e l l t h e i r f o r e i g n funds: at the 2 P r o f . Kuyucak Hazim A t i f , . op_. c i t . , p. l£3 • •^Loc. c i t . : 3 9 f i c t i t i o u s c o n t r o l price: and, e q u a l l y r i d i c u l o u s . , to- grant domestic c r e d i t s on the: "same b a s i s . The arrangement was not renewed a f t e r 185.2 and the. Is t a n b u l Bankasi' s p r i n c i p a l f u n c t i o n was, of course.,, discontinued along- w i t h i t . I t does not again appear- i n the f i e l d of Tu r k i s h banking. A f t e r the Bank of Constantinople withdrew from the scene, the r a t e on Pound S t e r l i n g immediately rose to 150 Kurus and the government made- an attempt, again to i n s t i t u t e another bank of s i m i l a r design, but does not appear to have been able to f i n d other w e l l e s t a b l i s h e d sponsors. b) Bank o f Ottoman S h o r t l y before the outbreak of the Crimean War i n 1856, three.- d i f f e r e n t -groups of private- bankers-; one English,, one French,, and one- domestic-, a l l G a l a t a Bankers,, expressed t h e i r w i l l i n g n e s s : to e s t a b l i s h a bank i n Constantinople. Immediately a f t e r the war the same bankers renewed t h e i r proposals. Because of the f i n a n c i a l standing of the. E n g l i s h group and the f r i e n d l y r e l a t i o n s then e x i s t i n g between Eng-land and the Ottoman Empire, Prime M i n i s t e r R e s i t Pasha gave the p r i v i l e g e of opening a bank to the E n g l i s h group. The i n s t i t u t i o n , known as the Bank! Osmani-,. Bank of Ottoman, was incorporated on the. 2i|.th May, 1 8 5 6 , ..under the: Imper i a l E d i c t of the King of England.^" Although the bank .authorized by the B r i t i s h law had i t s head o f f i c e i n London*, i t oper-ated, only- w i t h i n the- Empire' and had branches, every where ^"Prof. Kuyucak Hazim At i f . , .op. c i t . , p.'. 154 • except i n Egypt. I t s authorized c a p i t a l was- 500,.000 S t e r l i n g but h a l f of i t was paid for- the p r i v i l e g e of establishment.-^ In the beginning the .businesses, of the- bank we re-pure l y p r i v a t e and consisted of g r a n t i n g discounts and depos-i t s . But i n 1863, as already noted, the Ottoman Government gave i t the p r i v i l e g e of i s s u i n g banknotes i n r e t u r n f o r a s u b s t a n t i a l grant of c r e d i t . This. was. the f i r s t , and only assignment of the issue p r i v i l e g e i n Turkey and t h i s gave the bank the- status of a C e n t r a l Bank of Issue.. In the mean-time, the government als:o approved of an agreement by which a group of French c a p i t a l i s t s subscribed to the stock of the bank,, thereby i n c r e a s i n g i t s nominal c a p i t a l to. 2.7 m i l l i o n S t e r l i n g or to 67.5 m i l l i o n Francs. The- government a l s o allowed the bank to be designated as the Bank! Qsmanll Sahane-Imp e r i a l Ottoman Bank—and thus a f o r e i g n owned and incorpor-ated bank became to a l l i n t e n t s and purposes the- Government 6. Bank of Ottoman Empire. This bank has played such an important r o l e i n the- Turkish economy that i t s subsequent h i s t o r y has been reserved f o r Chapter ."V. c) Other F o r e i g n Bank's and Agents of F o r e i g n Owned Banks F o l l o w i n g the example of the Bank of Ottoman, other foreign- owned banks, were -established i n Turkey. -^.Prof. Kuyueak Hazim At if',. ,op_. c i t . - , p. l5i|. 6 l b Id. ,. p. 155. 1+1 Among the important ones, the. S i r k e t i • M a l i y e i Osmaniye Bankasi - The Ottoman F i n a n c i a l A s s o c i a t i o n - was, e s t a b l i s h e d i n l861j. by a group of E n g l i s h c a p i t a l i s t s w i t h a c a p i t a l of • 7 one m i l l i o n S t e r l i n g . I t s purpose was mainly to enlarge the 'Country's' cotton production and, thus" r e l i e v e the cotton, short-age i n the E n g l i s h t e x t i l e : industry*, caused by the C i v i l War In the United States. However, the e n t e r p r i s e was not con-tinued a f t e r 1865 when the C i v i l War came to an end. I t s assets and l i a b i l i t i e s were t r a n s f e r r e d to the Bank of Ottoman at the time of l i q u i d a t i o n . The I t i b a r i Umumii. Osmani .Bankasi - The General C r e d i t Bank of Ottoman - was the other f o r e i g n owned bank and was e s t a b l i s h e d i n 1865 by the w e l l known French bank named "Societe Gene r a l e a P a r i s " w i t h the- p a r t i c i p a t i o n of a l o c a l banker named Tub i n I . In October' of 18.68 the bank was granted the p r i v i l e g e of i s s u i n g 1^0 m i l l i o n of French Francs Trea-sury Bonds" f o r account of the Ottoman Government. The- bank prospered f o r a number of years but was obliged to close, i n 1 8 9 & . 8 The war between France- and "Germany i n 1870 made Vienna one. of the greatest f i n a n c i a l centers i n Europe and also- gave the • Ottoman Empire the b e n e f i t of s p e c u l a t i v e 7 Prof. Kuyueak Hazim At i f , , op. c i t . , p. 1%.. 8 I b i d . , , p. 156. e n t e r p r i s e s -which might otherwise have been undertaken e l s e -where-. The c o n s t r u c t i o n of a r a i l w a y between I s t a n b u l and C e n t r a l Europe- by the A u s t r i a n c a p i t a l i s t , . . Baron H i r s c h , 9 was begun at t h i s time.. Meanwhile,, two banks were e s t a b l i s h e d i n .Istanbul by A u s t r i a n c a p i t a l i s t s who. might otherwise have sought investment i n Germany and Prance. The names' of these banks were- the- Avusturya Osmanll Bankasi,. the A u s t r i a Ottoman Bank,, and the Avusturya Turk Bankasi, t h e - A u s t r i a T u r k i s h Bank. The- former Was e s t a b l i s h e d i n I87I as a s u b s i d i a r y o f f o u r f o r e i g n banks.,, the Union Bank of Vienna, Anglo A u s t r i a n Bank, the Banque de Bucarest and the Societe Generale de 1*Empire Ottoman. I t s combined c a p i t a l was 2.5 m i l l i o n S t e r l i n g . The l a t t e r was. e s t a b l i s h e d In 1872" by the Union Bank of Vienna w i t h the- p a r t i c i p a t i o n of the Galata Bankers:, J . Camendo and h i s partners H r i s t a k i and Z a r i f i . I t s combined c a p i t a l was 2 m i l l i o n S t e r l i n g . 1 1 The head o f f i c e s of both of these banks were i n Vienna. T h e i r businesses i n I s t a n b u l was transacted by means of l o c a l agents. However, these- two banks were, not long l i v e d . The-great 1873 f i n a n c i a l c r i s i s i n Vienna,- caused by the tremend-ous s p e c u l a t i o n transactions-,, made: i t necessary f o r both i n s t i t u t i o n s " to c l o s e t h e i r doors.- The A u s t r i a Ottoman Bank ^ Prof. Kuyucak Hazim At if,,, op. cit..,. p.. l56,. 1 0 L o c . c i t . H l b l d . , p. 157. l i q u i d a t e d i t s . l o c a l l i a b i l i t i e s ' ; the A u s t r i a T u r k i s h Bank t r a n s f e r r e d i t s e x i s t i n g assets and l i a b i l i t i e s to. the 12 I m p e r i a l Ottoman Bank.. In 1875^ the government suspended i n t e r e s t payments on the p u b l i c debt and f i n a n c i a l c o n d i t i o n s remained chaotic, u n t i l the establishment of the- P u b l i c Debt Department i n 1882. During t h i s seven year i n t e r v a l no f o r e i g n banking i n s t i t u t i o n s were, e s t a b l i s h e d i n the country. However, with the- i n s t i t u t i o n of a debt department and the assignment of some of the country's Income sources to the: payment of the government obligations', f o r e i g n c a p i t a l resumed i t s inward fl o w and again p a r t i c i p a t e d i n such p r o f i t s ' as were- to be made from the government f i n a n c i n g operations. The. banks e s t a b l i s h e d at t h i s period were mostly branches of the f o r e i g n owned institutions".- Among them the C r e d i t Lyonnais which opened branches i n Istanbul*. Izmir* J a f f a , and Jerusalem In lQl$; the .Alman-FllistIn. B a n k a s i -The Deutsche P a l e s t i n a Bank - opened branches i n Damascus, Beyrought and T r i p o l i i n 1 8 9 9 ; the B r i t i s h O r i e n t a l Bank opened a branch i n Izmir i n 1 9 0 0 ; the A n g l o - P a l e s t i n a Company opened branches in. Beyrought j. H a i f a , and Jerusalem i n 1902,; the Bank of Athens and East Bank opened branches: i n Istanbul,, Trabzon, Samsun, I z m i r , and Mersin i n 190ij.; the Wiener Bankverein i n 1905, an.d the Societe Commerciaie d' Orient, both 1 2 P r o f . Kuyucak Hazim A t i f , : op_. c i t , , p. 1^7• of which opened a branch i n I s t a n b u l . A most important f o r e i g n owned, the Deutsche Orient Bank, opened branches i n I s t a n b u l , Edirne,. Bursa and Adana i n 1906 and operated as one of the- l e a d i n g banks i n Turkey u n t i l the beginning of the Second World War.1^-During the f i f t e e n years i n t e r v a l between the prov-i s i o n of C o n s t i t u t i o n a l .Government i n 1908. and the e s t a b l i s h ment of the Turkish Republic i n 1923, a. few more; f o r e i g n owned banks were founded. The Turkiye M i H i Bankasi -The N a t i o n a l Bank of Turkey - was one- of them. I t was e s t -ablished i n 1909 by S i r Ernest Cas.sel,. an E n g l i s h banker, and incorporated under T u r k i s h commercial law., there being no banking law at that time. I t had an authorized c a p i t a l of one m i l l i o n S t e r l i n g , one f o u r t h of which was paid i n , and made s u b s t a n t i a l loans to the government and l o c a l Indus t r i a l i n s t i t u t i o n s . However,, i n spite, of these a c t i v i t i e s l5 i t did not prosper and went, out of business: i n 1910. Two other f o r e i g n banks, which, were e s t a b l i s h e d dur-ing t h i s p e r i o d , contained some domestic p a r t i c i p a t i o n i n t h e i r ownership. They were the Turkiye T i c a r e t ve,Sanayi  Bankasi - The Commercial and I n d u s t r i a l Bank of Turkey -and.the S e l a n i k Bankasi - Bank of S a l o n i k a . The former was 1 3 P r o f . Kuyucak Hazim A t i f , op_. c i t . , pp.. 159-160. -^During the war a l l German c i t i z e n s i n Turkey were placed i n Concentration centers and t h e i r business e s t a b l i s h ment, i n c l u d i n g banks, were closed up. 1 ^ P r o f . Kuyucak Hazim A t i f , . op..' cat.., pp. 161-162. e s t a b l i s h e d i n 1910 with a c a p i t a l of T.L. ££o,.000., but at the beginning of the F i r s t World War i t was closed as the r e s u l t of f i n a n c i a l d i f f i c u l t i e s brought about by war. The l a t t e r was founded, i n 1888 by a group .of Turkish, and Foreigner Bankers With a c a p i t a l of two m i l l i o n French Francs. I t was i n e o r -17 p orated, and performed a general banking business. ' This bank i s s t i l l i n operation i n Turkey and has two branches. d) Other D omestic Banks A f t e r the establishment of the Bank of Constantinople i n l81(.7-, s e v e r a l other p u r e l y domestic hanking i n s t i t u t i o n s were s t a r t e d i n the country. Some of them have survived and have made a considerable c o n t r i b u t i o n to the Tur k i s h economy.. In i860 the- Union F i n a n c i e r s was formed by the Galata Bankers,., and, f o r a short, time, helped to maintain s t a b i l i t y i ft i n the f o r e i g n market f o r T u r k i s h currency. Another one, the: Turkiye Bankasi - Bank of Turkey - was e s t a b l i s h e d i n the same: year by the same group of bankers w i t h the p a r t i c i p a t i o n , of another important T u r k i s h f i n a n c i e r named Mires. His .chief interest, was to obtain the p r i v i l e g e of i s s u e , and wi t h that purpose i n mind he contracted to make a large, loan to the Ottoman Government. However, the. issue p r i v i l e g e was denied and the bank did not have e i t h e r s u f f i c i e n t funds or c r e d i t to continue i n business. A f t e r paying ten Instalments on i t s l 6 . p r o f . Kuyucak Ha^zim A t i f , op_. c i t . , p. 162. 1 7 I h . i d ., p. 1.61. l 8 l b i d . , pp. 1.5V155. 46 government obligations- the bank was obliged to close and Mires himself was a r r e s t e d . ^ The S i r k e t i Umumiyei Osmaniye Bankasi. - the Ottoman General A s s o c i a t i o n - another p r i v a t e ; dome's t i c bank,, was est a b l i s h e d i n 1864 w i t h an authorized - c a p i t a l of two m i l l i o n S t e r l i n g . I t s founders were. A. B a l t a z z i , H r i s t a k i Zagrafos, M i s i r r i o g l u Bogos,. and the Imperial Bank of Ottoman. I t was al s o founded .with the- i n t e n t i o n -of securing the p r i v i l e g e of" issue and d e a l i n g i n government s e c u r i t i e s . I t went out of business i n 1 8 9 3 , presumably as a r e s u l t of the world depres-• ?o si o n and f i n a n c i a l d i f f i c u l t i e s of" that p e r i o d . In 1868 the country's f i r s t n a t i o n a l savings i n s t i -t u t i o n was founded by Mi that Pasha. I t was" known as the Emnlyet Sandlgl. - the S e c u r i t y Bank - and it's p r i n c i p a l b u s i -ness was to accept deposits and to make loans against the s e c u r i t y of pledged personal belongings and r e a l e s t a t e mort-gages. This i n s t i t u t i o n operated s u c c e s s f u l l y and i s now one of the le a d i n g savings banks i n the. country. I t w i l l be r e f e r r e d to again i n Chapter- IV. •Some other-purely domestic banks were--established i n Turkey during the l a t t e r part of the nineteenth and the beginning of the twentieth century. Among them., the Z i r a a t -19 Loc. c i t . Prof. Kuyucak Hazim At i f , . op . c i t . , p. 15>5 20, Bankasi - the A g r i c u l t u r a l Bank, was the- most important one. I t was e s t a b l i s h e d i n 1888 by Mithat Pasha,, the founder of the Safety Box. The Z i r a a t Bankasi was the beginning of today's A g r i c u l t u r a l Bank of the T u r k i s h Republic. . D e t a i l e d information on the l a t t e r Is. given i n Chapter IV. Three years a f t e r the foundation of the A g r i c u l t u r a l Bank the Mid i l l 1 Bankasi - Bank of Mitylene,. was e s t a b l i s h e d . I t was a p a r t n e r s h i p between a banker from. I s t a n b u l and a c a p i t a l i s t i n M i t y l e n e . I t had a nominal c a p i t a l T.L.. 2611,-000 and dealt p r i n c i p a l l y w i t h i n d u s t r i a l and commercial concerns. A f t e r a few years s u c c e s s f u l operation, i t suf-21 fered great losses and f i n a l l y closed i n 1893• The Osmanli Ticaret^Bankasi. - Commercial Bank of .Otto-man - was e s t a b l i s h e d by a group of Armenian Bankers i n 191.0 with an authorized c a p i t a l of T.L,. 1 0 0 , 0 0 0 . I t engaged i n general banking business but a f t e r a few years of operation., 22 closed. The Adapazarl .Islam T i c a r e t Bankasi, — Adapazarl Islam Commercial Bank - was e s t a b l i s h e d i n 1 9 I 4 . Subsequently the Bank's name was changed to the Commercial Bank of Adapazari. In 1937 1* became i d e n t i f i e d with the important Commercial Bank of Turkey. D e t a i l e d i n f o r m a t i o n about the bank.successor i n s t i t u t i o n i s given i n Chapter '.V. Prof. Kuyucak Hazim A t i f , op. c i t . , pp. 16,0-16-1. -Ibid..., p. 162 . The other banks which were e s t a b l i s h e d during t h i s p eriod were mostly r e g i o n a l and dealt mostly with the s p e c i -f i e d banking businesses. Among them were the I s t a n b u l Bankasi. Bank of I s t a n b u l - i n 191.1, the Konya I k t i s a d i M i . l l l Bankasi -N a t i o n a l Economic. Bank of Konya - i n 1912, the Karaman M i l l , !  Bankasi - N a t i o n a l Bank of Karaman - i n .1913 the Emyall  Gayrlmenkule ve I k r a z a t Bankasi - the Real E s t a t e and C r e d i t Bank - i n 19ll|-» t h e M i l l ! Aydin Bankasi - the Aydin N a t i o n a l Bank - in. 1911+ and the Aks.ehir Bankasi - the. Bank of Aksehir -23 which were the most important ones. Three of them are s t i l l i n operation. One of the country's most important p r i v a t e domestic banks, the. I . t l b a r l Mi 111 Bankasi - the C r e d i t N a t i o n a l Bank -was e s t a b l i s h e d i n 191? under the provisions, of a s p e c i a l c harter. I t marks the beginning of an attempt on the. part of the government to encourage the development of p u r e l y domestic banking i n s t i t u t i o n s . Under the p r o v i s i o n of t h i s .special c h a r t e r , granted i n February 1916, i t was given the f o l l o w i n g s p e c i a l concessions: ^ 1) No t r a n s a c t i o n taxes were to be l e v i e d i n i t s business. .2) I t s shares and dealings w i t h the Government were to be exempt from a l l stamp taxes. •"Prof. Kuyucak Hazim A t i f , ep_. c i t . , p. 162. 2 ^ I b l d . , pp. 162-163. 1+9 I t s authorized c a p i t a l was T.L. 1+ million',, one h a l f of which was paid - i n . In order' to buy the -shares one must be a Tu r k i s h N a t i o n a l , and the shares could not be. t r a n s f e r r e d to non-nationals. The bank-engaged i n a l l kinds' of banking business' and was' very successful.. I n 1927 i t consolidated with the Turkiye:, i s .Bankasi - the: Business' Bank of Turkey -which Is how the leading commercial b'.ank i n Turkey. ^ A d d i t -i o n a l information about the l a t t e r bank i s given i n the. f o l l o w -ing chapter. 3• S u r v i v i n g I n s t i t u t i o n s Of t h i r t y odd banking i n s t i t u t i o n s , both f o r e i g n and private- domestic, which were founded before the: establishment, of the T u r k i s h Republic on A p r i l 2 3 r d , 1923, a t o t a l of 22 were, s t i l l i n operation on the l a t t e r date. The record of the- very Important Bank of Ottoman i s .continued i n some d e t a i l i n the chapter immediately f o l l o w i n g . The. other- f o r e i g n i n s t i t u t i o n , the Bank of Salonika-,, has- not been of s u f f i c i e n t importance to warrant a d d i t i o n a l comment. D e t a i l e d i n f o r m a t i o n of the. s u r v i v i n g domestic banks i s gi v e n on; the I s t a n b u l Emnlyet  Sandlgi ~ the- S e c u r i t y Bank of I s t a n b u l ; the Turkiye Cumhurlyoti Z i r a a t Bankasi - the A g r i c u l t u r a l Bank of the Tu r k i s h Repub-l i c ; the Turk. T i c are t Bankas i - the- Commercial. Bank of Turkey; and Turkiye- Is Bankasi - the business Bank of Turkey. A combined statement of the p r i n c i p a l asset and l i a -b i l i t i e s of the 19 p u r e l y domestic banks as they e x i s t e d In Prof. Kuyucak Hazim At If.,... op. c i t . , p. 163. 50 1921). i s given below. TABLE V I I PRINCIPAL ASSETS AND LIABILITIES OP ALL DOMESTIC TURKISH BANKS IN 192!+ Amount Items - ( i n m i l l i o n T.L, Paid i n .Capital 21.9 R e s e r v e s 0.2 Deposits 13.2 Bond and S e c u r i t i e s P o r t f o l i o and Obliga t i o n s 0.9 Discounts and-Advances - - - . -.--25.1. """Prof. Kuyucak Hazim At i f , op. e f t . , p. 170. Note: The above: f i g u r e s include only 19 banks wi t h t h e i r 332 branches. The t o t a l of t h e i r authorized c a p i t a l is. T.L. 38.5 m i l l i o n . The Bank of Ottoman,, the Bank of S a l o n i k a and the I s t a n b u l Safety Box and P u b l i c Bank are not i n c l u d e d . CHAPTER IV ' BANKING IN MODERN TURKEY -The Quasi-public I n s t i t u t i o n s The Ottoman Empire was a l o s e r In the F i r s t World War and was obliged to accept the con d i t i o n s of the- V e r s a i l l e s and St. Germaine t r e a t i e s . In conformity w i t h these t r e a t i e s Turkey was' occupied by the A l l i e d Countries. Only a small area i n A n a t o l i a was l e f t to- the Turks'. However, a group of p a t r i o t s who opposed the r a t i f i c a t i o n of the- t r e a t i e s and the i n t e r v e n t i o n of the A l l i e d Countries., gathered under the leadership of Mustafa Kemal Pasha i n A n a t o l i a , to f i g h t f o r the independence of Turkey. These T u r k i s h l i b e r a l s ' not only succeeded i n d r i v i n g the A l l i e s out of Turkey but a l s o pro-claimed a Republic. Kemal Ataturk,. as he subsequently became known, was the country's f i r s t p resident and had no sooner vanquished the Western A l l i e s than he set about to westernize his* own country. But he- faced aimos't'-<inaurmoun't ao l e 1 o.B s tab l e s * 1. The Ref ormat i on Und e r . Kemal At aturk When Ataturk assumed the Presidency, the country Was worn out both economically and p h y s i c a l l y by the war. I t s a g r i c u l t u r a l output was low due- l a r g e l y to the f a c t that a good deal of the country's human resources and p h y s i -c a l -equipment had been destroyed during the- war. In the i n d u s t r i a l f i e l d some of the country's p l a n t s were, closed 5i 52 down from the l a c k of raw m a t e r i a l s and some others had been assigned to war production. However, even at f u l l c a p a c i t y t h e i r output was' small — a c o n d i t i o n undoubtedly due to. the' L i b e r a l T a r i f f system imposed on the country when i t c a p i t u l -ated to the Western Powers i n 1883."1" The country had suffered a chronic d e f i c i t i n i t s Balance of Trade: a f t e r that time- and did not achieve a favorable p o s i t i o n u n t i l the enactment of a p r o t e c t i v e t a r i f f i n 1929- As a consequence of over-issue during the war the co u n t r y 1 s money had l o s t most of i t s value and a f i n a n c i a l , as w e l l as an i n d u s t r i a l , r e c o n s t r u c t i o n had to be undertaken. The country was also s o c i a l l y backward. I t s s o c i a l s t r u c t u r e had stayed untouched f o r many years.. People were mostly uneducated. There were s t i l l old habits-and r u l e s dominating i n r e l i g i o n , , appearance, and dress. Ataturk s t a r t e d f i r s t w i t h the reform of the s o c i a l s t r u c t u r e . The .most important measures were; (1) The adoption of a modern c i v i l cede to replace the r e l i g i o u s laws under which the country had l i v e d f o r c e n t u r i e s ; (2) The adoption of the Roman alphabet i n place of the Arabic alphabet; (3) the adoption of European dress: i n place of the f e z and v e i l . He a l s o authorized vfreodbm. i n r e l i g i o n and granted f u l l female s u f f r a g e . He then undertook to s t r a i g h t e n out the country's' n a t i o n a l debt and money s t r u c t u r e and to i n i t i a t e an economic 1 P r o f . Dr. Suyla R e f i i Sukru. T a t b i k i I k t i s a t -Iktisat...Siyas'eti,. I s m a i l Akgun Matbaasi,. V o l . I I , pp. l51)-~ 155y Istanbul,. 19J+8 . 53 r e c o n s t r u c t i o n program under the aegis of the State. These l a t t e r ' undertakings are- explained i n some d e t a i l i n the f o l l o w i n g paragraphs. a) Settlement of the Public: F o r e i g n Debt As a r e s u l t of the- r e p a r a t i o n settlements which f o l -lowed the. F i r s t World War., the new Tu r k i s h Republic i n h e r i t e d from the Ottoman Empire a f o r e i g n p u b l i c debt i n the aggregate 2 amount of 107' .5 m i l l i o n Gold L i r a s . Subsequently, faced w i t h the task of reducing the f o r e i g n debts, the government held s e v e r a l n e g o t i a t i o n s with the c r e d i t o r c o u n t r i e s . In 1933, as a r e s u l t of prolonged n e g o t i a t i o n s , the p r i n c i p a l sum was reduced" to 962 m i l l i o n French Francs,, a sum which was thus equal to 80 m i l l i o n T u r k i s h l i r a s . But the r e v a l u a t i o n of the Franc i n 1936 a u t o m a t i c a l l y reduced t h i s ' o b l i g a t i o n to 3 li8 m i l l i o n T u r k i s h L i r a s , a l l of which was u l t i m a t e l y p a i d . The payments' themselves were- made p o s s i b l e by a u n i f i e d f o r e i g n loan payable on an Instalment b a s i s , which was f i r s t exchanged f o r the o r i g i n a l obligations'. b) F o r e i g n Exchange C o n t r o l The n e c e s s i t y of making r e p a r a t i o n payments to the v i c t o r i o u s a l l i e s placed a heavy burden on the Tu r k i s h exchanges and also- -called f o r t h e i r r e g u l a t i o n and c o n t r o l . Otherwise i t i s d o u b t f u l i f the payments' could have been met. Under the exchange p r o t e c t i o n Act of 1930 t h i s task was given ^ P r o f . Dr. Suvla R e f i l Sukru, op_. c i t . , p. 180. 3 L O G . c i t . over to a •consortium of both d o m e s t i c a l l y and f o r e i g n owned banks headed by the M i n i s t r y of Finance.^" With the found-a t i o n o f the C e n t r a l Bank of the T u r k i s h Republic, t h i s duty was transformed to the l a t t e r i n s t i t u t i o n . The manner i n which the C e n t r a l Bank was operated i s explained i n Chapter VI. c) The .Economic.. Plans In the domestic economic sphere the new Republican Government immediately embarked upon a planned i n d u s t r i a l expansion under the aegis of the S t a t e . This- p o l i c y grew out of the r u l i n g Republican Party of the P u b l i c ' s c o n v i c t i o n that without the- State- i n t e r v e n t i o n i t would be impossible to- speed a development which i n other countries had been achieved but slowly by purely private- e n t e r p r i s e s . And>. of course., there- were many examples of s u c c e s s f u l p u b l i c enter-p r i s e s i n the Western World i t s e l f . The f i r s t f i v e year i n d u s t r i a l p l a n was proclaimed 5 -i n 1931. I t was d i r e c t e d p r i m a r i l y to the chemical, cement., glass and bottle.-,, i r o n and s t e e l , paper and c e l l u l o s e , , and 6 t e x t i l e I ndustries." Before i t s completion i n 1936 another f i v e years' p l a n was proclaimed,, t h i s time- i n the mining., h y d r o e l e c t r i c , consumer goods and manufacturing i n d u s t r i e s . ' 4prof. Dr. Suvla Ref I I Sukru,. op. c i t . . . p. 1 8 2 . % b i d . , p. 3 5 6 . 6 I b l d . , pp. 3 5 6 - 3 5 7 . 7 l b i d . , p. 357• The main purpose of these plans was to e s t a b l i s h i n d u s t r i e s f o r the e x p l o i t a t i o n of the n a t u r a l resources of the country and thus to make i t l e s s dependent upon the importation of f i n i s h e d goods from abroad; also to improve employment and i n d u s t r i a l techniques to the same- extent.. At the same time, the program would improve the country's p o s i t i o n from the standpoint of the n a t i o n a l defence. The goals of the f i r s t f i v e years'' plan were- achieved, i n s p i t e of the 1 9 2 9 - 1 9 3 0 World Economic c r i s i s , , but the completion of the second f i v e year p l a n was a r r e s t e d by the outbreak of the Second World War. 2. The Quasi-public;. Banks As noted i n the conclusion of Chapter I I I , 2 2 banks were i n o p e r a t i o n when the T u r k i s h Republic was e s t a b l i s h e d i n 1 9 2 3 . Since that time t h i s number had been increased to f i f t y - f i v e . - . The remainder of t h i s chapter i s given to d e t a i l e d explanations of those which were p a r t i c u l a r l y i d e n t i f i e d with the country's economic development and which we have- therefore designated as the q u a s i - p u b l i c i n s t i t u t i o n s . Chapter V i s devoted to the p u r e l y p r i v a t e banking i n s t i -t u t i o n s and Chapter VI i s given to the C e n t r a l Bank of the T u r k i s h Republic. As' i n d i c a t e d by the l a t t e r - giyen below the q u a s i -p u b l i c banks were- i n s t i t u t e d to finance,, and,, i n some cases, 8 Prof, .Dr.. Suvla R e f i i Sukru, ,op_. c i t . . . p. 357 •, c i t i n g the Report of the T.R. M i n i s t r y of Economic Industry Examination Commission,. Ankara,, 1936-, p. XXI. to administer undertakings p a r t i c u l a r l y i d e n t i f i e d w i t h the country's economic p l a n s . They were: I s t a n b u l Emniyet Sand l g l - The S e c u r i t y Bank of I s t a n b u l . Turkiye Cumhuriyeti Z i r a a t Bankasi - The A g r i c u l t u r a l Bank of the T u r k i s h Republic Turkiye Emlak K r e d i Bankasi - The Real Estates Credit Bank of Turkey Sumerbank - The I n d u s t r i a l Bank I H e r Bankasi - The Provinces'Bank Etibank - The Mining Bank Halk Bankasi - The. P u b l i c Bank Ankara Ealk S a n d l g l - The. P u b l i c Bank of Ankara 1 s tanbul Halk S aridIg 1 - The P u b l i c Bank of I s t a n b u l Denize111k Bankasi - The Maritime Bank Turkiye- V a k l f lar... Bankasi - The Foundation Bank of Turkey. The banks were a l l e s t a b l i s h e d under' s p e c i a l Acts of the Turkish Great N a t i o n a l Assembly-. They now have a t o t a l of 6I4I1 branches., paid i n c a p i t a l arid reserves of about T.L. l,i±3!L,lL m i l l l o r i , the equivalent of almost 507 m i l l i o n o f United States Q dollars., and p l a y a s i g n i f i c a n t r o l e i n the Turkish economy. D e t a i l e d information on t h e i r i n s t i t u t i o n , , functions,, and operation of some of the most important pries- i s given below. a) I s t a n b u l Emniyet S a n d l g l - The-Security ..Bank,.of I s t a n b u l . As" already noted, t h i s bank was founded i n 1 8 6 7 . j . ^ . 9Monthly-Report of'the C e n t r a l Bank of the Turkish Republic, No. 5 , May,. 1956,. Ankara, p. 16. 1 0See- Chapter I I I , p. I4 .6. began as a m u t u a l i n s t i t u t i o n and i t s f o u n d e r , M i t h a t P a s h a , also promoted t h e f i r s t a g r i c u l t u r a l c r e d i t i n s t i t u t i o n i n the c o u n t r y . The bank f i r s t e s t a b l i s h e d at Ruscuk, i n T h r a c e . L a t e r , i n 1868, i t s head o f f i c e was l o c a t e d i n I s t a n b u l . The bank g r a n t e d loans on p e r s o n a l p r o p e r t y and r e a l e s t a t e f r o m s a v i n g s b r o u g h t i n by i t s d e p o s i t o r s . At the o u t s e t , the l a c k o f a fund of paid, i n c a p i t a l hampered the b a n k ' s a c t i v i t i e s . T h i s was p a r t i c u l a r l y s e r i o u s d u r i n g p e r i o d s of heavy w i t h d r a w a l s . On one o c c a s i o n a l o a n had to be n e g o t i a t e d w i t h a bank named S i r k e t i Umumiyei Osmaniye - the Ottoman G e n e r a l A s s o c i a t i o n - a t a r a t e o f 12 twelve p e r c e n t . , i n o r d e r t o a v o i d b a n k r u p t c y . In 1886 the bank was t a k e n u n d e r the c o n t r o l o f the M i n i s t r y of Com-merce and due to i t s subsequent s u c c e s s i n a t t r a c t i n g d e p o s i t s was able to- reduce i t s l e n d i n g r a t e s f r o m n i n e to s i x p e r c e n t , However, because of the f e a r engendered by the P r a n c e - P r u s s i a n War i n 1871 and the war w i t h R u s s i a i n 1878, the bank a g a i n got i n t o d i f f i c u l t i e s and was s u b s e q u e n t l y t a k e n u n d e r the 13 p r o t e c t i v e wings of the .^.Agricultural Bank. W i t h the sup-p o r t of the l a t t e r bank, i t u l t i m a t e l y became one of the l a r g e s t and most i n f l u e n t i a l banks i n the c o u n t r y . A l t h o u g h the bank was p a r t i c u l a r l y i d e n t i f i e d w i t h r e a l - e s t a t e l o a n s a n d - p l e d g e b u s i n e s s , i t s powers and 1 ] - P r o f . Kuyueak H a z i m A t i f , p_p_. c i t . , p . 172. l 2 S e e C h a p t e r I I I , p . 1|6. l 3 p r o f . Kuyueak H a z i m - A t i f , op_. c i t . , p p . 172-173, c i t i n g A t a s a g u n Y u s u f S a i m , . ^ A g r i c u l t u r a l C r e d i t i n T u r k e y , V o l . I , I s t a n b u l , 1930. 58 operations were e v e n t u a l l y expanded and Included almost any type of c r e d i t t r a n s a c t i o n s i n c i d e n t a l to i t s p r i n c i p a l b u s i -ness. I t now accepts demand as w e l l as time and n o t i c e deposits.,, and may grant c r e d i t against almost any kind of s e c u r i t y , i n c l u d i n g stocks and bonds'. I t may a l s o lend .on gold and s i l v e r c o i n s , b u l l i o n , and on jewelry made of precious metals. In f a c t , i t appears to be able to lend any conveyance of value. Being a mutual i n s t i t u t i o n and. hence i n t e r e s t e d i n paying dividends to depositors' r a t h e r than to stockholders, I t i s i n t e r e s t i n g to note that the r a t e paid on time deposits has been varied from a maximum of nine to a minimum of three per .cent. Today,, on funds committed' f o r a long period of time* the rate, may be as high as s i x per .cent; The borrow-ing r a t e between 1908 and 1918 was eigh t per cent., but by 1922 I t had r i s e n to twelve per cent.,, .and by 1 9 3 0 , to seventeen per cent. One year l a t e r i t had f a l l e n again to twelve per cent, and by 1937 was nine per cent. I t remained at nine- per cent, u n t i l 1948 when i t was lowered to eight and one-half per .cent. F i n a l l y ; in. 1 9 5 l , the rate- was f i x e d at seven per cent, to conform to the general l e v e l then applicable. 15 to . a l l l e nding i n s t i t u t i o n s of i t s p a r t i c u l a r c l a s s . Under the d i r e c t i o n of the A g r i c u l t u r a l Bank of the Tur k i s h Republic,, the S e c u r i t y Bank of I s t a n b u l increased I t s "^.Pr.of, Kuyueak Hazim A t i f , . o£. cit.... pp. 1 7 4 - 1 7 5 . 1 % b i d . , pp. 1 7 7 - 1 7 8 , and the Mm t h l y Report of the C e n t r a l Bank of the Turk i s h Republic, No. 5 , May,- 1956, Ankara, p. 6 9 . 59 branches to twelve. I t now has a reserve fund of s i x m i l l i o n of T u r k i s h L i r a s , and i s considered to be one of the lea d i n g i n s t i t u t i o n s i n i t s f i e l d . Some idea of the progress made r e c e n t l y by the Secur-i t y Bank of I s t a n b u l i s . revealed by the. f o l l o w i n g summary. TABLE V I I I ITEMS PROM THE ASSETS AMD LIABILITIES OP THE SECURITY BANK OF ISTANBUL, 1931-1955 * (In m i l l i o n T.L.) Year Reserves Deposits Loans Y e a r l y P r o f i t s from ODerations' 1931 - 2 2 . 2 2 1 . 7 1936 - 2 1 . 2 1 6 . 5 0 . 0 3 1939 •- 1 7 . 7 1 0 , 8 0 . 0 3 191+1 - 11+.2 6 . 9 0 . 2 0 191+6 1+.1+ 21+, 6 19, 0 o . 5 o 1953 5 . 6 6 3 . 8 1+1.0 0.1+0 1951+ 5 .9 7 5 - 1 1+5.7 0 . 3 9 1955 6 . 1 76.8. 1+5.7 0 . 6 0 '""Prof., Kuyucak Hazim A t i f , op, c i t . , p. 181+; and Monthly Report of the C e n t r a l Bank of the Tu r k i s h Republic, No. 5 , M a y 1956, Ankara, pp. 32,. 1+0, 1+2. """"'For the. years 1931 t o 191+6. loans' included deposits granted to the- A g r i c u l t u r a l Bank of the Tu r k i s h Republic. There are three other s i m i l a r saving and loan banking i n s t i t u t i o n s now doing business i n Turkey. They are: Halk •^Monthly Report of the C e n t r a l Bank of The. T u r k i s h Republic, No. 5 , May 1956, Ankara, p. 1 6 . 60 Bankasi - the .Public Bank, I s t a n b u l Halk Sandlgl - the P u b l i c Bank of I s t a n b u l , and Ankara Halk S a n d l g l - the P u b l i c Bank . of Ankara. They were e s t a b l i s h e d by the government In order to. provide .credit to the small businesses at comparatively a low r a t e of i n t e r e s t . Their paid i n c a p i t a l of approximately T.L. 16 m i l l i o n i s provided by the. S t a t e . The l a t t e r i n s t i -t u t i o n s now operate a t o t a l of 1|1 branches. b) Turkiye.Gumhuriyeti Z i r a a t Bankasi - The A g r i c u l t u r a l Bank  of the Tu r k i s h Republic : ! The A g r i c u l t u r a l Bank of the T u r k i s h Republic i s a l s o a s u r v i v o r bank of the time of Ottoman Empire. I t was a cooperative, undertaking and was founded by Mithat Pasha who was then Governor of the provinces of Nis and Tuna, and was f a m i l i a r w i t h the problem of p r o v i d i n g c r e d i t f o r a g r i -c u l t u r a l e n t e r p r i s e s . Money was then a v a i l a b l e only from p r i v a t e lenders and e x t o r t i o n a t e r a t e s were charged f o r i t . In order to .overcome these d i f f i c u l t i e s , and to provide c r e d i t to the farmers a t reasonable r a t e s , he founded an i n s t i t u t i o n which may be c a l l e d a farmers' loan bank, i n the v i l l a g e , of P I r o t , on the. borders of B u l g a r i a and Yugoslavia. The loanable funds of these banks were to be provided by t h e i r p o t e n t i a l borrowers to the extent of ten per cent, of t h e i r respective- annual output. 1? A minimum of T.L. 200 had to be accumulated before any loans could be made. The l a t t e r bore an I n t e r e s t of twelve p e r cent, and were to be secured 1 ? P r o f . Kuyucak Hazim A t i f , op_. . c i t . , p. 187, c i t i n g Atasagun Yusuf Saim,. The A g r i c u l t u r a l Cooperatives and  A g r i c u l t u r a l . Bank of B u l g a r i a , p. 2. by r e a l estate- mortgages and by guarantees. I n d i v i d u a l loans could' not. exceed twenty L i r a s . 1 8 The system appears to have worked reasonably well,, and was extended to neighbouring v i l l a g e s . In 1883 these banks were: taken under the c o n t r o l of the M i n i s t r y of Commerce and P u b l i c Works and then they beeame known as the- P u b l i c Farmers Bank. In order to increase t h e i r a v a i l a b l e c a p i t a l , , t h i s l a t t e r agency was authorized to- have one per cent. tax on a l l the a g r i c u l t u r a l lands' w i t h i n the area served by the bank. In 1888 t h i s system was replaced by a formal A g r i c u l -t u r a l Bank wi t h a c a p i t a l of T.L... 10 m i l l i o n , subscribed by 19 the State. Although the l a t t e r I n s t i t u t i o n extended i t s operation to the acceptance of deposits and granting of .ordinary loans., i t s o r i g i n a l functions., i . e ; , the f i n a n c i n g of farmers and making a g r i c u l t u r a l improvement loans.,, remained unchanged. By 1916 the bank's c a p i t a l had r i s e n to T.L,. f i f t e e n m i l l i o n ; by 1921+ to T.L. 30 m i l l i o n , , and by 1930 to T.L. 100 m i l l i o n . In June, 1937, the A g r i c u l t u r a l Bank was reorganized and has since been known as the A g r i c u l t u r a l Bank of the T u r k i s h Republic and operated as. an arm of the S t a t e . I t now secures i t s c a p i t a l from a s p e c i a l grant of s i x per cent. - L O P r o f . Kuyueak Hazim A t i f , op_. c i t . , p. 188 19rbid.., p. 189. 62 ^ of the general lard, tax,, a one-half percent, p a r t i c i p a t i o n i n the N a t i o n a l Budg'et and from e x t r a o r d i n a r y grants from the "Treasury. I t a l s o accumulates loanable reserves out of 20 the p r o f i t s made- from i t s operations. The- bank i s administered by the r e p r e s e n t a t i v e s of f i v e d i f f e r e n t bodies' and agencies. These are; ( l ) The gen-e r a l assembly made up of the members of the Budget-, Finance, Economy*. A g r i c u l t u r a l c o u n c i l of the Great N a t i o n a l Assembly and the. members of the c o u n c i l charged w i t h the examination of the- expenditure of M i n i s t r i e s . , and f i v e members d e s i g -nated f o r a year- by the Prime Minister.;. (2) an o f f i c i a l 21 known as the C r e d i t Regulator; (3) the Comptrollers; (1+) A committee representing the Board of Governors; and 22 (5) D i r e c t o r General appointed by the Cabinet. The: duty of the C r e d i t Regulator Committee, i s to determine, the gen-e r a l c r e d i t p o l i c y to be followed by the bank. This is, worked out in, accordance with the needs of the. d i f f e r e n t a g r i c u l t u r a l undertakings and economy as: a whole. In 19i|-6 the- bank had 59 branches and 231 agencies throughout the a g r i c u l t u r a l s e c t i o n s of the country. The bank a l s o employs t r a v e l l i n g agent's to negotiate loans and ^°Prof, Kuyueak Hazim Atif., op_.. e f t . , pp.. 203-201+. 2l0n J u l y 1+, 1939, by the Act No. 31+60 the Comp-t r o l l e r s " of the bank have been abolished,-, and the a u t h o r i t y was given to the General Assembly of the: Bank and to the. General C o n t r o l Assembly of the State. 2 2 P r o f . Kuyueak Hazim A t i f , . op_. c i t . , p. 20/5. 6 3 make c o l l e c t i o n s i n the remote . d i s t r i c t s where there are no 23 resident, agents and a branch of t h e bank. The types: of the a g r i c u l t u r a l c r e d i t s which the bank i s designed to provide may be summarized as f o l l o w s : 1) Short-term production credits-, the m a t u r i t y of which may not. exceed a year. 2) Long-term c r e d i t s , not exceeding twenty years,, designed to improve a g r i c u l t u r a l output and to a s s i s t the farmers i n a a c q u i r i n g t i t l e s to owner-ship of the land. 3 ) C r e d i t s to f a c i l i t a t e and increase the marketing of a g r i c u l t u r a l products. The above mentioned credits' can be given against mortgages and personal s e c u r i t i e s . The i n t e r e s t rates are.; two and '.one-half per cent, f o r c r e d i t s of three months-m a t u r i t y , two and three-quarters per cent, f o r s i x months., three per cent, f o r one year,- and f o u r per cent, f o r more than one- year. 2^" In a d d i t i o n to p r o v i d i n g a g r i c u l t u r a l credit., the bank also administers the cooperatives marketing of a g r i -c u l t u r a l , products and the operation of the.'nominally indep-endent A g r i c u l t u r a l C r e d i t Cooperatives and the' S e c u r i t y Bank o f I s t a n b u l . I t also, acts as f i s c a l agent of the Government In places where there are no branches of the 25 C e n t r a l Bank. . po " .-•' "• " '• Prof. Kuyucak Hazim A t i f , , op_. c i t . , p. 2 05. 2 ^ I b l d . . , pp. 2 0 6 - 2 0 7 . 2 % b i d . , p. 2 0 9 ; a l s o see Chapter IV., p. 5 7 -Today.,, the hank's paid i n c a p i t a l stands' at T.L. 295 m i l l i o n and i t s reserves at. T.L. 136 m i l l i o n , , about l 5 0 m i l l i o n .United States d o l l a r s . I t now. has 513 branches and 26. agencies' .throughout; the country. The nature and d i s t r i -b u t i o n of i t s loans i s . revealed i n the f o l l o w i n g t a b l e . TABLE IX NATURE AND DISTRIBUTION OP LOANS MADE BY THE AGRICULTURAL BANK OP. THE TURKISH REPUBLIC ON SELECTED DATES,. 1946-1955'"" ( a l l amounts i n m i l l i o n ' of Turk i s h Lira.) Loans. 1946 1953 1954 1956 C r e d i t .Given D i r e c t l y to Producers 82 . 9 6 9 1 . 6 755-0 754-8 Current Advances to Agr. Coop. 57-7 237-7 256..7 2 7 8 . 1 Current. Advances to Agr- Coop. .& .Sales Unions- 2 5 . 8 187-9 2 9 0 . 2 2 8 3 - 7 Other Loans . 1C-5 7.7-6 ...llj.8.8 1.73-4 T o t a l 1 7 6 . 9 1,-194-8 1,450.7 ; 1,481.0 " Prof. Kuyueak Hazim A t i f , op. cit;.;, p. 202, . and Monthly Report of the C e n t r a l Bank of the Tu r k i s h Republic, No. 5 , May 1 9 5 6 , Ankara, p. 34-The. rather' phenomenal growth, of the bank i s demon-st r a t e d by the f o l l o w i n g c h r o n o l o g i c a l summary • of - its.. Monthly Report of the C e n t r a l Bank of the T u r k i s h Republic.,- May 1 9 5 6 , Ankara:,. No. 5 , p. 1 6 . reported c a p i t a l , deposits-, l o a n s , and net p r o f i t s . TABLE X CAPITAL,- DEPOSITS,, LOANS, AND EARNINGS OP THE AGRICULTURAL BANK OF THE TURKISH REPUBLIC BY SELECTED YEARS> 1890-1955---( a l l amounts In m i l l i o n of Tur k i s h L i r a s ) Paid i n C a p i t a l A g r i c u l t u r a l Annual Years and Deposits Loans P r o f i t Reserves - . ... .. ^  u ^ 1890 2 . 9 . 0 0 1 .6 — 1900 6 . 7 . 0 0 8 2 . 9 . 0 6 1910 1 0 . 3 .100 5.1+ .20 1920 11 .7 . 0 9 0 3 - 5 -1930 2 7 . 2 5 0 . 9 3 5 . 7 -191+0 1+8.2 116 .8 5 0 . 2 3 - 1 191+6 1 0 7 . 1 2 5 9 . 9 176'. 9 13.1+ 1953 3 2 0 . 3 8 9 1 . 8 l , 1 9 l + . 8 3 9 . 2 1951+ 3 7 2 . 7 911 .0 1,1+50.8 1+1.1 1955 1+31.2 ' 1 , 0 9 3 . 7 1,1+80.9 1+5.0 "'Prof. Kuyucak Hazim At i f - , op_. c i t , , , pp. 2 0 0 - 2 2 1 , and Monthly Report of the C e n t r a l Bank of the T u r k i s h Republic, No. 5 :, May 1956,- Ankara, pp. 31+-1+0-1+5-c) Turkiye.Emlak K r e d i Bankasi - The Real Estates C r e d i t  Bank of Turkey i Formal i n s t i t u t i o n s f o r f i n a n c i n g urban r e a l estates and g i v i n g c r e d i t against mortgages are quite old In Turkey,, but before the foundation of the Republic t h e i r operations were q u i t e l i m i t e d . ,Eytam .Sandlklari. - The' Orphans' Funds -and V a k i f P a r a l a r i I d a r e s i - The A d m i n i s t r a t i o n of .Pious Foundations - both founded before the R e v o l u t i o n , made modest loans on the s e c u r i t y of r e a l e s t a t e . However, the proceeds of the loans th.ems.e.lve s were used mostly f o r con-27 sumption purpose s. The f i r s t mortgage- bank i n a modern sense, the pre-decessor of the Turkiye Emlak K r e d i Bankasi, was founded i n 1927 a f t e r the- F i r s t World War, and the- War of Independence as a j o i n t e n t e r p r i s e by p r i v a t e c a p i t a l i s t s and the. govern-28 ment i t s e l f . I t s o r i g i n a l purpose was to i n v e s t money entrusted to the- State by guardians,, executors,, et c e t e r a and the a d m i n i s t r a t o r s of p r i v a t e t r u s t s . The: h a l f of the bank'-s c a p i t a l was supplied by the Treasury and the ether h a l f was subscribed by the p r i v a t e shareholders. The t o t a l nominal c a p i t a l of the bank was T.L. 20 m i l l i o n at the beginning, and h a l f of t h i s amount was paid I n . The bank was a l s o given the p r i v i l e g e of supplementing i t s a v a i l a b l e 29 funds by i s s u i n g i t s own debentures. This bank u l t i m a t e l y proved to- be too small to meet demands made, upon i t by home-builders and f i n a l l y on September 1, 19l±6 the Turkiye Emlak Kr.edl. Bankasi - Real Estates C r e d i t Bank of Turkey - was founded w i t h a c a p i t a l of hundred m i l l i o n of T u r k i s h L i r a . I t was patterned a f t e r 2 ? P r o f . Kuyucak Hazim A t i f , op_. . c i t . , p.. 278. 2 8 I b i d , , p. 278. 2 9 I b i d . , pp. 278-279. the C r e d i t F o n d e r of Prance and i s sometimes c a l l e d the C r e d i t P o n c i e r of Turkey. Like i t s predecessors,, the bank was j o i n t l y owned by the S t a t e and p r i v a t e c a p i t a l i s t s , but the government holds f i f t y - f i v e per cent, of the out-standing shares and i s therefore- i n c o n t r o l of the bank. Pour members of i t s Board of Governors', i n c l u d i n g the D i r e c t o r General, are designated by the M i n i s t r y of Finance. The remaining three members are elected by the p r i v a t e share-30 hol d e r s . In 1956 the bank's nominal c a p i t a l was increased to T.L.. 300 m i l l i o n , of which 1 3 5 . 6 m i l l i o n has been paid i n . The bank's head o f f i c e i s located i n Ankara, and there are t h i r t y - n i n e branches and agencies operating 'in d i f f e r e n t 31 parts of the country. The p r i n c i p a l f u n c t i o n s of the bank and the manner 32 i n which i t accomplishes them may be summarized as f o l l o w s : 1) I t encourages house b u i l d i n g and home ownership, by g i v i n g long-term c r e d i t s against mortgages. The term may be as long as f i f t y years. 2) I t may b u i l d apartments or houses e i t h e r on owned or unused lands and s e l l them on i n s t a l l m e n t loans to p r i v a t e owners and to cooperative undertakings. 3) I t may e s t a b l i s h insurance companies or a s s o c i a t e with the other insurance .companies i n the develop-ment of the mortgage insurance business i n the country. 3°Prof. Kuyueak Hazim A t i f , op., c i t , . , pp. 2 8 0 - 2 8 1 . ^ M o n t h l y Report of the C e n t r a l Bank of the Turk-i s h Republic, No". 5 , May 1956, Ankara, p. 1 6 . 3 2 P r o f . Kuyueak Hazim A t i f , o£. c i t . , pp. 2 8 1 - 2 8 2 . ii) I t may perform any kind of banking businesses •essential to the c a r r y i n g out of i t s p r i n c i p a l business. In order- to perform i t s main tasks the- bank was given the p r i v i l e g e of i s s u i n g debentures guaranteed by the Turkish Treasury. The amount of these, debentures may not exceed f i v e times of I t s p a i d i n c a p i t a l . Of the l a t t e r - t o t a l as much as seventy per cent, may be made- a v a i l a b l e f o r the cooperative undertakings. The i n t e r e s t r a t e charged by the bank may not 33 exceed four per cent. Wet p r o f i t of the bank s h a l l be d i s t r i b u t e d as: f o l l o w s : 1) F i f t e e n per cent, to common reser v e s , u n t i l the amount became equal to the paid i n c a p i t a l . 2) Ten per cent, to e x t r a o r d i n a r y r e s e r v e s , u n t i l the amount became twenty per cent, of the. paid i n c a p i t a l . 3) F i v e per cent, to i t s employees-as an annual bonus. The more important items i n the bank's statement of l i a b i l i t i e s and assets' are shown i n Table XI. The extent of the development of the mortgage loan business by a l l banks i n Turkey i s revealed i n Table X I I . Two other banks, Y a p l ve K r e d i Bankasi - the B u i l d -ing and C r e d i t Bank - and Turkiye V a k l f l a r Bankasi - Founda-tions-Bank of Turkey - were a l s o e s t a b l i s h e d , a f t e r the ... .33 P r of, Kuyucak Hazim A t i f , op_. . c i t . , p. 2 8 2 , and Monthly .Report of the C e n t r a l Bank of the T u r k i s h Republic, No.. 5,- May, 19%, Ankara,, p. 6 9 . 69 TABLE XI CAPITAL, DEPOSITS, LOANS AND EARNINGS-OP THE REAL ESTATES CREDIT BANK OF TURKEY IN SELECTED YEARS, 1 9 4 6 - 1 9 5 5 * ( a l l amounts i n m i l l i o n o f - T u r k i s h L i r a s ) Years Paid i n C a p i t a l and Reserves Deposits Loans on Mortgages Annual P r o f i t 191+6 1 2 . 2 1 1 . 9 2 4 . Z 1 .5 1953 1 0 5 . 1 1 4 3 . 7 2 2 9 . 0 7 .1 1954 1 2 4 4 1 6 5 . 6 288.5 1 0 . 0 1955 11+7.5 2 3 0 . 5 3 9 0 . 0 11-5 "•"Prof. Kuyueak Ha'zim A t i f , op., c i t . , pp. 288-289, and Monthly Report of the C e n t r a l Bank of the Tu r k i s h Republic,. No. 5 , May 1956, Ankara, pp. 3 2 - 4 0 - 4 5 . Second World War, o r i g i n a l l y to lend money on r e a l estate and to encourage the homeownership i n the country. Later on, however, they became pu r e l y commercial banks and described under that heading. TABLE X I I REAL ESTATE' MORTGAGE LOANS IN TURKEY BY SELECTED YEARS 1 9 4 6 - 1 9 5 5 * ( i n m i l l i o n of Tu r k i s h L i r a s ) ' _ . ,,,, ., ' Years' ' •'.:' y ;:;' • 1' '•';': • Amount' »;'• 1946 1+2-3 1953 3 2 5 . 9 1954 4 0 7 . 8 ....... 1955 . . . 5 1 9 . 0 . - ""Prof-.- Kuyueak Hazim Atif-,. op. c i t . , p. 288,. and Monthly Report of the C e n t r a l Bank of the Turkish Republic, No. 5 , May 1956,. Ankara, p.. 3 3 -d) Siimerbank . - The: . I n d u s t r i a l Bank Although t h i s ' bank has become a government agency f o r the promotion, development, and operation of p u b l i c e n t e r p r i s e s and mining spheres, i t was o r i g i n a l l y i n s t i t u t e d as a p u b l i c lending agency to provide c a p i t a l f o r the develop-ment of p r i v a t e e n t e r p r i s e s . I t was chartered on A p r i l 19, 1 9 2 5 , as Turkiye Sanayi ve Maadin Bankasi - The I n d u s t r i a l and Mining Bank of Turkey - and was an adjunct, of the. M i n i s t r y 3 6 of Trade and Commerce. Its' c a p i t a l was accumulated from sources received from government investments i n the. shares of both p u b l i c and p r i v a t e i n d u s t r i a l concerns arid from a l l o t -ments from the General N a t i o n a l Budget. I t was a l s o allowed 37 to supplement i t s funds by the i s s u i n g of debentures. By the end of 1932 the bank had a p a i d i n c a p i t a l of nine m i l l i o n T u r k i s h L i r a s . Although the main purpose of the establishment of t h i s bank was to be served by f i n a n c i n g the promotion and development of p r i v a t e i n d u s t r i a l undertakings,, i t seems that most of the c a p i t a l at i t s d i s p o s a l was a c t u a l l y used to finance the current output o f some of the government's own i n d u s t r i a l undertakings. Thereupon the government formed another i n s t i t u t i o n . , , under the. t i t l e of Turkiye .'Sanayi K r e d i 3^The E n g l i s h t r a n s l a t i o n of the bank name i s done according to i t s d u t i e s i d e n t i f i e d . 3kprof. Kuyucak Hazim A t i f , ep_. c i t . , p. 222;,, c i t i n g Act No, 633, a r t i c l e 1. 3 7 i b l d p . 223-, c i t i n g Act No. 633, a r t i c l e 3-Bankasi - The I n d u s t r i a l C r e d i t Bank of Turkey - to c a t e r to the c a p i t a l needs of the p r i v a t e business concerns and another i n s t i t u t i o n named Devlet Sanayi O f I s i - S t a t e I n d u s t r i a l O f f i c e - to take care of the current needs of the: i n d u s t r i a l and mining concerns promoted by the State.. These two i n s t i t u t i o n s proved unable to meet the requirements .of the' f i r s t f i v e years p l a n and i n 1933 were merged to form what i s now known as Sumerbank - the I n d u s t r i a l 39 Bank - w i t h a c a p i t a l of twenty m i l l i o n of T u r k i s h L i r a s . L i k e other State economic ventures the Sumerbank i s a p u b l i c cooperation nominally independent i n i t s designated f i e l d of e n t e r p r i s e . The decree under which the bank was e s t a b l i s h e d provides t h a t ; (1) i t s h a l l undertake the adminis-t r a t i o n of a l l i n d u s t r i a l p l a n t s formed and operated by the State.,. (2) i t s h a l l a s s i s t i n the f i n a n c i n g of p r i v a t e as w e l l as State i n d u s t r i a l undertakings, (3) i t s h a l l study, p l a n , and promote new I n d u s t r i a l undertakings of the S t a t e . I t may open t e c h n i c a l schools f o r the t r a i n i n g of t e c h n i c i a n s and engineers, and provide f i n a n c i a l a s s i s t a n c e to the U n i v e r s i t y students i n order to make- advance study i n the. f o r e i g n c o u n t r i e s . The decree a l s o authorized the t r a n s a c t i o n of a . 1+0 general banking business. 3 8 p r o f . Kuyueak Hazim A t i f , op. c i t . . , p. 221+. 3 9 I b i d . . , pp. 2 2 4 - 2 2 5 . 4PlbId., pp. 2 2 5 - 2 2 6 . 72 At the. time o f the establishment i n 1933 the bank had a paid i n c a p i t a l of T.L. 10.7 m i l l i o n . In 191+6, i n order to provide the execution of a new i n d u s t r i a l plan,, i t s author-i z e d c a p i t a l was increased to T.L.. 200 m i l l i o n . At the l a t t e r amount T.L. 93.1 m i l l i o n was paid i n . In 1955 i t s ' authorized c a p i t a l was increased to T.L. 500 m i l l i o n of which 192.5 was paid i n . The bank may supplement I t s a v a i l a b l e c a p i t a l by i s s u i n g debentures. The s t a t e e n t e r p r i s e s taken over and e s t a b l i s h e d .by the Sumerbank f e l l i n t o s i x main groups. These are; ( l ) The N a t i o n a l S t e e l and Iron p l a n t s w i t h a c a p i t a l of T.L. 1+2 m i l -lion., (2) The Sewing Cotton and T e x t i l e p l a n t s with a c a p i t a l of T.L. 50 m i l l i o n , . (3.) The C e l l u l o s e I n d u s t r i a l Corporation with a c a p i t a l o f T.L. 20 m i l l i o n , ( 1 + ) The Cement Industry p l a n t s with a c a p i t a l of T.L. 8 m i l l i o n , (5) The Leather and Shoe's Company w i t h a c a p i t a l of T.L. 5 m i l l i o n , and (6) The Domestic Goods Marketing Agency w i t h a c a p i t a l o f T.L. m i l l i o n . ^ 2 The' bank a s s i s t s i n the management as w e l l as In the f i n a n c i n g of these undertakings and occupies a s i n g u -l a r l y important p o s i t i o n i n the i n d u s t r i a l development of Turkey. The head o f f i c e of Sumerbank Is located i n Ankara. I t now has eleven branches and agencies throughout the country. 4 l p r o f . Kuyucak Hazim A t i f - , op_. c i t , , pp. 228-229, and Monthly Report of the C e n t r a l Bank of the T u r k i s h Republic, No. 5,. May 1956, Ankara, p. 16. 4 2 P r o f . Dr. Suvla R e f I I Sukru..• T a t b i k i I k t 1 sat -I k t i s a t S i y a s e t i , I s t a n b u l , 191+8,. V o l . II,- p. 370 and Cent. 73 The f o l l o w i n g t a b l e shows the expansion of the bank»s a c t i v i t i e s i n the i n d u s t r i a l sphere. TABLE- X I I I CAPITAL, FINANCIAL OBLIGATION, INVESTMENT AND PARTICIPATION, LOAN AND EARNINGS OF THE SUMERBANK BY SELECTED YEARS, 1933-1955 * ( a l l amounts i n m i l l i o n of T u r k i s h L i r a ) Paid i n C a p i t a l F i n a n c i a l Investment Years and Reserves O b l i g a t i o n s and Loans Annual .., ... ,• .ji- .... . ... . . . P a r t i c i p a t i o n ... P r o f i t 1933 191+6. 1953 1951+ 1955 1 0 . 7 1 0 0 . 6 2 1 8 . 7 21+3.9 1 9 2 . 5 " 1+5.0 111 . 1 1 8 0 . 9 1 7 3 . 6 153-9 327.1+ 298.6-2 5 6 . 6 31+.9 6 . 6 119.7 2 5 . 5 1 9 6 . 3 1 0 . 9 .201.3 1+1+.3 """Prof. Kuyucak Hazim At i f . , op_. c i t . , pp. 2 2 8 - 2 3 1 , 232,-and Monthly Report of the C e n t r a l Bank of the T u r k i s h Republic,. No. 5 , May 1956,- Ankara, pp. 32-31+-1+0-1+5. """"Financial o b l i g a t i o n o f the bank is " mostly to the C e n t r a l Bank. '""""""The nominal c a p i t a l o f the bank was- increased to T.L, 500 m i l l i o n at this- date. The- amount a c t u a l l y paid Is not a v a i l a b l e when t h i s t h e s i s was w r i t t e n . e) I H e r Bankasi - The, Province st Bank Another important q u a s i - p u b l i c I n s t i t u t i o n e s t a b l i s h e d by the government o f Kemal Ataturk was' I H e r Bankasi - The Provinces» Bank. Its- main purpose was to b r i n g under one agency the planning and f i n a n c i n g of the f u t u r e development of the country«s towns and v i l l a g e s . This bank, was e s t -ablished i n June 1933 under a charter' which s u i t e d the scope of i t s operation to the development of towns and v i l l a g e s . L a t e r , i n May 1945 i t s powers and duties' were increased to incl u d e c i t i e s and whole m u n i c i p a l i t i e s . ^ 3 The o f f i c e of the bank i s located i n Ankara. I t has no branches and agencies.- The Board o f Governors- and the D i r e c t o r General are appointed by the Cabinet upon the recommendation of the M i n i s t r y of I n t e r i o r - B u s i n e s s e s J^'t The nominal c a p i t a l o f the bank was hundred m i l l i o n T u r k i s h Liras. i n 1945-, 26.6 m i l l i o n of which i s paid i n . The enabling Act,. under- which i t was established-, provides that f o r t y per cent. of the sum s h a l l be provided by the provinces,, t h i r t y per cent, by the. m u n i c i p a l i t i e s , and the remaining t h i r t y per cent, by the towns through assignment of tax revenues to a maximum of f i v e p e r cent. The c o n t r o l i s also, o b l i g a t e d to make- such allotments as may be required from the general fund. The bank may a l s o Issue debentures to the extent o f k5 f i f t y per cent, of i t s authorized c a p i t a l . A f t e r the Second World War,, the bank"1 s nominal c a p i t a l was increased to T.L. 200 m i l l i o n , , and i n 1954,- to T.L. 300 m i l l i o n . Today i t has a paid i n c a p i t a l and reserves ^ 3 P r o f . kuyucak Hazim A t i f , ep_. c i t . , p. 249-, c i t i n g the Act No. 2301 and the Rep or t . of, the , Bud get ,C om-mission of the N a t i o n a l Assembly,. No. 03, May, 19/4-5 • W-tbid,, p. 253,. c i t i n g Bank Reg u l a t i o n , A r t i c l e No. 27-44-^ I b l d - . , pp. 249-250. amounting to T.L. 1 1 8 . 8 m i l l i o n . The' bank's enabling' Act provides that ten per cent, of i t s p r o f i t s s h a l l be set aside f o r o r d i n a r y reserves.,, f i v e per cent, f o r e x t r a o r d i n a r y reserves,, f i v e per cent, f o r employee bonuses, t h i r t y per cent, f o r a Town Management fund, the remaining f i f t y per cent, to be turned back to the c i t i e s , towns, and v i l l a g e s to f u r t h e r a s s i s t them i n making improvements }^ The bank has prospered i n i t s ' f i e l d and' has added considerably to the p r e s t i g e of the country's a d m i n i s t r a t i v e o r g a n i z a t i o n s . I t s progress i n terms of assets" and l i a -b i l i t i e s i s given i n the f o l l o w i n g ' t a b l e . TABLE XIV CERTAIN ASSETS AND LIABILITIES OP' THE PROVINCES'BANK BY SELECTED YEARS.,. 1946-55 „. ...... •- . •  , ( a l l amounts i n m i l l i o n of T u r k i s h L i r a ) " " Years Paid i n C a p i t a l .and.Reserves . , , Deposit s Loans Annual . P r o f i t . 19^6 7 4 4 1 1 . 8 2 2 . 5 1.1 1953 8 7 . 1 5 5 . 1 1 5 8 . 2 3-7 1954 1 0 1 . 9 57-6 2 1 1 . 7 3 .6: 1955 1 1 8 . 8 6 1 . 5 2 4 9 . 2 4 . 0 """Prof. Kuyueak Hazim Atif-, op. c i t . , pp. 2 5 6 - 2 5 7 , and the Monthly Report of the C e n t r a l Bank of the T u r k i s h Republic, No. 5 , May '1956, Ankara-, pp. 3 0 - 4 0 - 4 7 . ^ M o n t h l y Report of the C e n t r a l Bank of the T u r k i s h Republic, No. 5 , May 1 9 5 6 , Ankara, p. 4 ° • 4 7Prof. Kuyueak Hazim A t i f * 0£. c i t . , p. 253-f ) Etibank - The Mining Bank^ 8 T h i s bank was es t a b l i s h e d on June 2 0 , 1 9 3 5 , to a s s i s t i n the e x p l o i t a t i o n of the s u b - s o i l resources of the country,. and to promote the development of h y d r o - e l e c t r i c p l a n t s i n both p u b l i c and p r i v a t e spheres. This bank a l s o serves as an a d m i n i s t r a t i v e agency of the State i n c a p a c i t i e s s i m i l a r to 49 those a l l o t t e d to the A g r i c u l t u r a l Bank. The bank's main o f f i c e i s located a l s o i n Ankara. At the time of establishment, i t s authorized c a p i t a l was twenty m i l l i o n of Tu r k i s h L i r a s . Later on,., i n 1942*. i t was increased to T.L. 100 m i l l i o n and i n 19i|-6- to T.L. l £ o . Of the l a t t e r sum T.L. 97'-7 m i l l i o n was paid i n . Today the bank has an authorized c a p i t a l of T.L. 500 m i l l i o n , h a l f of which i s pai d i n , and reserves of T.L. 2 0 . 8 m i l l i o n . The' c a p i t a l fund i t s e l f i s ' provided by the M i n i s t r y of Economic and such p r o f i t s as have been made from the operations. With the persuasion of the T u r k i s h Cabinet t h i s c a p i t a l may be supplemented by the issuance of debentures i n an amount riot exceeding T.L. 150 m i l l i o n . I t s a d m i n i s t r a t i v e o r g a n i z a t i o n 50 i s riot u n l i k e t h a t of the other State Economics Agencies. The Etibank i s re s p o n s i b l e f o r the operation of the seven,State owned mining undertakings and three State owned ^ 8The E n g l i s h t r a n s l a t i o n of the Bank's name i s ' done according to i t s d u t i e s . • . . 4 9Prof. Kuyueak Hazim At i f . , op_. c i t . , p. 2 3 9 , c i t i n g Act Ko. 2 8 0 > , A r t i c l e 1. ^°Ibld. , pp. 2[|1-2[|.2, and Monthly. Report of the Cen-t r a l Bank o f the T u r k i s h Republic, Ko. 5 , May 1 9 5 6 , Ankara,, p. 1|0 • 77 power p l a n t s . The former c o n s i s t of the E r e g l i Coal P l a n t s , the Western L i g n i t e P l a n t s , the. Coal Marketing I n s t i t u t i o n of Turkey, the Eastern Chromium P l a n t s , the D i v r i g i Iron Mine P l a n t s , the Copper Plants I n s t i t u t i o n s of Turkey, and the K e c i b o r l u Sulphur Plants". The l a t t e r power p l a n t s are located 5 l at Tunchilek, Caglayik and Kadincik. The scope of i t s -undertakings has already been noted In the i n t r o d u c t i o n of t h i s t h e s i s . The importance of the bank's operations i s revealed by the f o l l o w i n g summary. TABLE. XV CERTAIN ASSETS AND LIABILITIES OP THE ETIBANK BY SELECTED YEARS, 191+6-55 ( a l l amounts In m i l l i o n of T u r k i s h Lira)""' Paid i n F i n a n c i a l Investment Debtor Annual Years C a p i t a l and Dep- O b l i g a t - and Account P r o f i t .Reserves ... o s i t s ions -""* P a r t i c i p a t i o n s . . 191+6 55-6 28 .4 51.7 4 9 . 2 6 0 . 8 6.1 1953 250.8 191.3 189.8 143.2 389. 1 19.8 1954 269.3 300.0 259.6 237-4 381. 9 11.5 1955 261+.2 366.5 521.7 233.3 516. 3 14.1 '""Prof. Kuyueak Hazim A t i f . op., c i t . * . pp. 21^-21+$,. and Monthly Report of the C e n t r a l Bank of the T u r k i s h Republic, No. 5 , May 1956, Ankara,, pp. 32-35-40~4£. """"""Financial o b l i g a t i o n of the bank i s mostly to the Central Bank. -"-'"•-"-Debtor Account of the bank c o n s t i t u t e s "Open C r e d i t Accounts t o the State I n s t i t u t i o n s " . ^ P r o f . Dr. Suvla R e f i i Sukru, T a t b i k i I k t i s a t -I k t i s a t S i y a s e t i , I s t a n b u l , 1948, V o l . I I , p. 372 and Cont. 78 g) D e n i z c i l l k Bankasi - The Maritime Bank The only other quasi-public, bank of importance e s t -ablished i n Turkey during the modern period i s D e n i z c i l l k  Bankasi - The Maritime Bank - which began operation i n 195.2. AS i t s name indicates,, the bank was founded to promote Turkey's Maritime- i n t e r e s t s and to develop a merchant f l e e t . I t has an authorized c a p i t a l of T.L. 500 m i l l i o n of which .236 m i l l i o n has: been pai d i n . I t has fourteen domestic branches: and six f o r e i g n agencies. The enabling Act under which i t was e s t a b l i s h e d provides f o r c a p i t a l advances on both f u t u r e merchant f l e e t developments and loans f o r current operations. Along with t h e i r other duties the o f f i c i a l s and d i r e c t o r s are charged with the r e s p o n s i b i l i t y of operating the governmentally owned merchant f l e e t . The l a t t e r p a r t was taken over from the D i r e c t o r General of Ports and Tr a n s p o r t a t i o n . Some idea of the bank's.. impor-tance i s i n d i c a t e d by the f a c t that i n 1953 i t had assets valued at T.L. 899 m i l l i o n . ^ 2 The growth of the p u b l i c i n s t i t u t i o n s i n Turkey since the e a r l y years of the Republic i s summarized i n the f o l l o w i n g t a b l e . ^ M o n t h l y Report of the C e n t r a l Bank of the Turkish Republic, No. 5 , May 1956, Ankara, p. 3 8 . 79 TABLE. XVI PRINCIPAL. LIABILITIES AND ASSETS OP THE QUASI-PUBLIC BANKS OP TURKEY BY YEARS., 1 9 2 6 - 1 9 5 5 * ( a l l amounts In m i l l i o n of Turkish. L i r a ) . Years C a p i t a l and Reserves . Deposits Loans L i q u i d Assets P a r t l c i -• p a t i o n Annual Earn-ing. 1926 .21.9 2 2 . 6 21+.8 - 1 1 .8 1931 2 7 . 7 7 8 . 7 5 6 . 3 - 1.7 -1939 2 6 9 . 139. 1 8 9 . 1+6. 97- 1+. 191+5 510. 25I+. 657- 1 0 9 . 261+. 26.1+ 191+9 1 , 112 . 1+53. 6 1 0 . 1 6 0 . 31+7. 35.1+ 1951 1 , 1 0 3 . 9 1 0 . 81+0. 2 6 7 . 1+58. 53.1+ 1952 1,-119. I , l 8 l . 91+1. 2 9 0 . 4 7 9 . . .81. . 1953 1 , 9 9 7 . i , 5 i 5 . 1,11+9. 3 6 2 . 5 0 7 . 9 6 . 1951+ 2 , 3 7 9 - 7 1 , 6 8 5 . 3 3 , 1 7 1 . 3 8 8 . 8 577.1+ 7 8 . 8 1955 3-, 159.1+ 2 , 0 2 5 . 1 3 , 7 2 6 . 7 l+7'5. 6 2 5 . 1 1 2 2 . 8 """Dr. Bard a Suleyman, Jo u r n a l of Finance- and Economics, I s t a n b u l , 1955, p. 125,* Prof. Kuyucak Hazim A t i f , op. c i t . , pp. 196-197-220-221-186,• and Monthly Report of the C e n t r a l Bank of the Turk i s h Republic, No. 5 , May 1956, Ankara, pp. 19 - 2 1 . CHAPTER V BANKING IN MODERN TURKEY -THE. PRIVATE- BANKS, DOMESTIC AND FOREIGN The growth and expansion which has: taken p l a c e i n the T u r k i s h economy during the past quarter of a century is. nowhere b e t t e r i l l u s t r a t e d than i n the f i e l d of the p u r e l y p r i v a t e banking i n s t i t u t i o n s . When the Government of Kemal A t a t u r k assumed power In 1923 there were twenty-three such banks w i t h 332 branch o f f i c e s . Among these l a t t e r establishments, the Bank of Ottoman and the Bank < of S a l o n i k a were f o r e i g n owned. By 195>6 the number of banks had increased to f o r t y - f o u r and the branches to 563-These l a t t e r t o t a l s Included seven f o r e i g n owned banks and t h e i r f i f t y l o c a l branches. This growth i n numbers was then matched by the growth of the business handled by the banks.' In 19,23 t h e i r combined loans and investment were twenty-six m i l l i o n T u r k i s h L i r a : i n 19^6 they were T.L. I , 3 l 5 m i l -l i o n . Meanwhile t h e i r combined c a p i t a l and reserves had increased from T.L, 39 m i l l i o n to T.L. 289,- and the deposits from T.L. 13 m i l l i o n to T.L.. 1 , 9 6 2 . The extent to which t h i s r a p i d development was conditioned by bank-ing laws and enactments,, and the more important domestic and f o r e i g n i n s t i t u t i o n s , are the p r i n c i p a l concern of' t h i s chapter. 80 81 1. T u r k i s h Banking Law U n t i l s e v e r a l years a f t e r the 1923 R e v o l u t i o n Turkey had no d e f i n i t i v e banking law, s e t t i n g f o r t h the p r i v i l e g e s and o b l i g a t i o n s of banks and the nominal requirements f o r obta i n i n g a bank c h a r t e r . Purely domestic i n s t i t u t i o n s : were- formed under s t a t u t e s p r o v i d i n g f o r the operation of general commercial enterprises,, and were sub-jected only to the country's c i v i l law. The f o r e i g n i n s t i -tutions., l i k e the Bank of Ottoman, were authorized under s p e c i a l A c t s • i n t h e i r r e s p e c t i v e countries of o r i g i n . While some d o m e s t i c a l l y owned banks' were incorporated,, others were mostly p a r t n e r s h i p and i n d i v i d u a l p r o p r i e t o r -s h i p s . In May, 1933,- t h i s apparent i n d i f f e r e n c e to s t a t u t -ory d e f i n i t i o n was modified by the proclamation of an Act f o r the p r o t e c t i o n of d e p o s i t o r s . 1 And i n J u l y of the same year i n t e r e s t rates were made subject to r e g u l a t i o n by p u b l i c a u t h o r i t y under the p r o v i s i o n of an Act covering 2 . . . the business of le n d i n g . F i n a l l y , i n 1936, a comprehen-si v e and d e f i n i t i v e Bank Act was proclaimed and a l l p r i v a t e banking i n s t i t u t i o n s were brought under i t s p r o v i s i o n . 3 Under the general terms of t h i s measure a l l p r i v a t e -'-Prof. Kuyucak Hazim A t i f , . op. ;c i t , , p. I4.89. 2 I b i d . , pp. I4.90-J4.9i. 3 I b i d . , p. I4.89. 82 domestic banks were required to i n c o r p o r a t e , and the oper-a t i o n of the f o r e i g n banks was brought under the s u r v e i l l a n c e of the Turkish Cabinet.^" The- f o r e i g n banks were required to c a r r y t h e i r accounts i n T u r k i s h funds and to meet the c a p i t a l requirements imposed upon t h e i r d o m e s t i c a l l y owned :" competitors. a) C a p i t a l Requirements The lower l i m i t s of the c a p i t a l and reserve r e q u i r e -ments imposed on the banks" are f i x e d by the population of the c i t i e s ' i n which the banks' head o f f i c e s are l o c a t e d . In c i t i e s having a p o p u l a t i o n above 250,000 the minimum amount i s one m i l l i o n T u r k i s h L i r a s . Above 100,000 and below 250,000 i t i s h a l f a m i l l i o n T u r k i s h L i r a s . Between 100,000 and 50,000 a c a p i t a l and reserve t o t a l l i n g T.L. 125,000 i s r e q u i r e d . In c i t i e s of 50,000 or l e s s popula-t i o n a minimum of T.L. 50,000 c a p i t a l and reserve is o b l i g a t o r y . Deposits may not be accepted u n t i l these minimum requirements have been accomplished. b) Deposits and Reserves R e s t r i c t i o n s The amount of deposits which a bank may accept i s l i m i t e d by the amount of i t s c a p i t a l and reserve. F o r •capitals and reserves t o t a l i n g T.L. 500,000 or l e s s , the •^Banking. Act,. No. 2999, June 1936,, Section I , A r t i c l e 2. % b i d . , S e c t i o n I , A r t i c l e 5-6 I b i d . , S e c t i o n I , A r t i c l e 8. amount of deposit which a hank can accept i s three times as muchrof the c a p i t a l and reserves. For the c a p i t a l and reserves between T.L. 500,000 and one m i l l i o n i t i s f i v e times. From one to f o u r m i l l i o n i t i s s i x times,, and f o r a l l amounts above four m i l l i o n a bank can accept seven times as much of i t s c a p i t a l and reserves.? The banks are a l s o required to separate t h e i r current deposit account from t h e i r saving accounts and e v e n t u a l l y to e s t a b l i s h a f i f t e e n per cent, cash r e s e r v e f o r the p r o t e c t i o n of d e p o s i t o r s . The l a t t e r cash reserves had to be accumulated by the banks, es t a b l i s h e d before 1936, w i t h i n f i v e years a f t e r the p r o y i s — Q i o n of the Act. In 1942, t h i s required cash reserve was increased to twenty per cent, and a l s o i n 1953 'It was required to deposit them i n the C e n t r a l Bank of the T u r k i s h g Republic. However, the banks were allowed to Include government bonds and other assets as t h e i r reserves. Mean-while the depositors are also insured by p r o v i d i n g them l e g a l r i g h t s , l i m i t e d to f o r t y per cent, of t h e i r d e p o s i t s , upon the assets of the bank at the time of bankruptcy. 1^ Beside the r e g u l a r reserves required by the general commerce- law and by the banks'1' regulations-, every bank has ^Banking. Act, No. 2999, June 1936, S e c t i o n I I I , Article~ 2"o\ 8 I b l d . , S e c t i o n I I I , A r t i c l e ' s 25-26. 9Appendix to Banking Act, No. 4I96,. A p r i l 19i|2, A r t i c l e I and No. 6122, J u l y 1953, A r t i c l e - 1. 1 0 B a n k i n g Act. No. 2999, June 1936, S e c t i o n I I I , A r t i c l e 29. to accumulate f i v e per cent, of i t s net p r o f i t to surplus., i n order to meet unexpected losses', u n t i l the l a t t e r amount i s equal to the amount of paid i n c a p i t a l . This i s not subject to income t a x . " ^ c) C r e d 11 ; Res t r 1c 11 on s The amount of c r e d i t that a bank may extend to any one customer i s l i m i t e d to ten per cent, of the amount of i t s paid i n c a p i t a l and reserves. However., t h i s can be increased to twenty per cent, when i t i s given against B i l l of Exchange and L e t t e r of C r e d i t and to s i x t y per cent, when i t i s granted against gold and government bonds'. C r e d i t s granted to the government and governmentally owned i n s t i t u t i o n s ' are excepted from t h i s r u l e . Banks may not grant c r e d i t against r e a l e s t a t e , u n l e s s they are' e s t a b l i s h e d f o r that purpose. However, i n order to guarantee t h e i r c r e d i t s , they can accept r e a l estate mortgages.13 Another requirement of the Act i s that the q u a r t e r l y statement of the bank's' c o n d i t i o n and the r e s u l t of i t s own 111 accounting year must be published i n the- l o c a l press. 2. Important Domestic P r i v a t e Banks Of the t h i r t y - s e v e n d o m e s t i c a l l y owned p r i v a t e banks now operating i n Turkey, the most important ones are: ^ B a n k i n g .Act., No. 2999, June 1936., S e c t i o n IV, A r t i c l e 31." 1 2 I b i d . , S e c t i o n I I I , . A r t i c l e 19. ! 3 l b i d . , S e c t i o n I I I , A r t i c l e 2 3 . ^Ibld..... S e c tion IV, A r t i c l e 32. Turk T i c a r e t Bankasi - The Commercial Bank of Turkey. Turkiye Is Bankasi - The Business Bank of Turkey. Yapi v e K r e d i Bankas 1 - The B u i l d i n g and C r e d i t Bank. Turkiye. S i n a i Kalkinma..Bankasi - The I n d u s t r i a l Develop-ment Bank of Turkey. The nature of these r e s p e c t i v e undertakings and con-t r i b u t i o n of the development of the economy of Turkey is' given i n the f o l l o w i n g i d e n t i f i e d summaries. a) Turk T i c a r e t Bankasi -.Commercial Bank of Turkey The Commercial Bank of Turkey was es t a b l i s h e d on March 9, 191J+, at Adapazari under the- name of Adapazari Islam T i c a r e t Bankasi - The Adapazari Islam Commercial Bank. I t was incorporated under a s p e c i a l Act of the Turk i s h Assembly w i t h an- authorized c a p i t a l of 111.720 T u r k i s h L i r a which could be paid In instalments of three Kurus per week. I t opened f o r business w i t h a paid i n c a p i t a l of T.L. 1,179. In 1929 i t s nominal c a p i t a l was increased to one m i l l i o n , T.L. 972,500,.of which was paid in,, and i t s name, was changed to Adapazari Turk Ticaret .Bankasi, - The Tu r k i s h Commercial Bank of Adapazari. In 1937 i t became known as. Turk T i c a r e t 15 Bankasi - The Commercial Bank of Turkey. During the e a r l y p e r i o d of I t s growth the Bank pros-pered and extended i t s operations throughout the country. ^ P r o f . Kuyucak Hazim A t i f , op_. c i t , , pp. 291 - 2 9 2 ; and Docent Dr. Barda Suleyman, J o u r n a l of Finance and •Econ-omic s, The N a t i o n a l S t r u c t u r e of P r i v a t e Domestic Banking, I s t a n b u l , 1951+, pp. 30-31. However, i t suffered heavy withdrawals during the e a r l y t h i r t i e s and would not have survived had i t not been f o r support given i t by the A g r i c u l t u r a l Bank of the- T u r k i s h Republic, the Business Bank of Turkey, the Sumerbank,. the-Real Estates C r e d i t Bank and the M i n i s t r y of Finance. These l a t t e r i n s t i t u t i o n s and agency subscribed one m i l l i o n Turk-i s h L i r a s to i t s c a p i t a l funds and i n the meantime i t s nominal c a p i t a l increased to T.L. 2.2 m i l l i o n . ^ While the head o f f i c e of the bank located i n Ankara, the I s t a n b u l branch i s i t s most important l o c a t i o n and I t has f i f t y - t h r e e other branches and agencies. The bank transacts a general banking business and now has a paid i n c a p i t a l of T.L. 11 m i l l i o n , reserves T.L. l+.J m i l l i o n , and deposits T.L. 73 m i l l i o n . Three m i l l i o n of I t s c a p i t a l has been subscribed by a corporation c o n s i s t i n g of the M i n i s t r y of Finance-, the Business Bank of Turkey, the- A g r i c u l t u r a l Bank of the T u r k i s h Republic,, the Sumerbank and the Real Estate C r e d i t Bank. The other -eight m i l l i o n belongs to the. p r i v a t e s h a r e h o l d e r s . 1 7 The-bank's growth i n terms of assets and l i a b i l i t i e s i s shown i n the f o l l o w i n g table. P rof. Kuyueak Hazim A t i f , . op. c i t . , p. 292. 1 7Docent Dr. Barda Sulevman,. op. c i t . , p. 32; and Monthly Report of the C e n t r a l Bank of the T u r k i s h Republic, No. 5, May 1956, Ankara, p. 17• 87 TABLE XVII PRINCIPAL ASSETS AND LIABILITIES OP THE COMMERCIAL BANK OP TURKEY, BY SELECTED YEARS, 1923-1955* : ( a l l amounts i n . m i l l i o n of Turk i s h L i r a ) . - : ; Paid i n C a p i t a l Years and .Reserves : Deposits Loans• Investments 1933 1.3 ' 1+.0 2.8 1.2 1939 2.3 6 . 0 1.5 2.1+ 191+5 2 . 6 12.0 0.8 1+.8 191+9 6 . 3 30.0 li+.O 10.5 1950 — 1+0.0 21.7 9.7 1952 13-7 • 61+. 0 31+.7 21.5 1953 11+-3 73.0 1+9.0 29.5 1955 15.7 - -";:Doc ent Dr. Bard a Suleyman,. op. c i t . . . pp. 15-16-17, c i t i n g P e r i o d i c a l of Conjuncture ^  April-May -r 1951+> No. i\.-6, 16. The earnings'' experience of the bank Is shown in'the f o l l o w i n g t a b l e . TABLE XVIII. EARNING EXPERIENCE AND DIVIDENDS 07 THE COMMERCIAL BANK OP TURKEY, BY SELECTED YEARS, 1932-1953""" ( a l l amounts i n thousand T u r k i s h L i r a s ) Years C a p i t a l and Reserves Gross P r o f i t Net P r o f i t Dividend Net P r o f i t as a fo of Cap. and Res. 1932 1939 191+5 191+9 1950 1952 1953 1,200 2,300 570 136 1+ 11.3 931+ - -2", 600 1,615 1+07 6 15.6 6,300 3,767 785 8 12.1+ - l+,-61+3 1,008 10 — 13,700 6,533 1,706 12 12.1+ li+,.300 8,01+6 2,018 12 ll+.l """Docent Dr. 1923 and between Barda Suleyman, op_. c i t . , 1931+ and 191+2 bank did not p. 18. Before pay dividends. 88 b) Turkiye Is Bankasi - The Business Bank of Turkey While t h i s bank now tr a n s a c t s any kind of banking business-, i t was o r i g i n a l l y i d e n t i f i e d w i t h the promotion of i n d u s t r i a l - and commercial undertakings and might w e l l have been c a l l e d an investment bank. I t has p a r t i c i p a t e d both as' promoter and i n v e s t o r i n the o r i g i n a l f i n a n c i n g of the country's most important business e n t e r p r i s e s . I t was est a b l i s h e d on August 2 6 , 1921+,. i n Ankara w i t h a c a p i t a l of one m i l l i o n T u r k i s h Lira-, one-fourth of which was paid i n . On November 2 5 , 1921+, i t s I s t a n b u l branch was opened. Later on, i n 1927> i t absorbed the C r e d i t N a t i o n a l Bank and increased i t s nominal c a p i t a l to T.L. 1+ m i l l i o n . Today, i t has a paid i n c a p i t a l and reserve amounting to T.L. 70.2 m i l l i o n . The number of i t s branches,, agencies., and o f f i c e s has-,, i n the meantime,, increased to 186 , i n c l u d i n g one i n Alex a n d r i a . The l a t t e r , i n c i d e n t a l l y , , i s the f i r s t f o r e i g n -1 o branch to be e s t a b l i s h e d by a T u r k i s h bank. The Business Bank of Turkey has been the leader i n the development of the country's saving process and therefore has made- a s u b s t a n t i a l c o n t r i b u t i o n to the n a t i o n a l economy. At the beginning of 1921+ i t had only 96 saving accounts-,, amounting to T.L. l 2 , . 5 V i . B 7 the end of 191+6 the number had r i s e n to 189,077 and the t o t a l to T.L. 81+.6 m i l l i o n . By 1953 t h i s l a t t e r sum had increased to T.L. 61+1+ m i l l i o n , and Dooent Dr. Barda Suleyman, op. c i t . , No. 10, pp. 3 3 _ 31+. c o n s t i t u t e d approximately 21 per cent, of a l l funds held i n 1 9 deposit by the Tu r k i s h banks. The bank f i r s t I d e n t i f i e d i t s e l f w i t h i n t e r n a l trade: and financed both i n d i v i d u a l exporters and export companies. A f t e r the Second World War i t was obliged to surrender i t s ' i n t e r e s t i n the export companies, but continued to finance i n d i v i d u a l f o r e i g n t r a d e r s . The bank's encouragement of i n d u s t r i a l development began i n 1935 when i t p a r t i c i p a t e d w i t h the A g r i c u l t u r a l Bank of the Tur k i s h Republic and the Sumerbank i n the under-taking of the c a p i t a l shares of the Associated Sugar' Refin-e r i e s of Turkey. The- sum involved was twenty-two m i l l i o n of Tur k i s h L i r a s . I t a l s o p a r t i c i p a t e d i n the f i n a n c i n g of the country'-s t e x t i l e i n d u s t r y , the establishment of a. glass and b o t t l e plant i n I s t a n b u l , and the promotion of se v e r a l c o a l mining ventures. After- the establishment of Etibank the l a t t e r were- e v e n t u a l l y taken over by the government. In 1925 i t a s s i s t e d i n the establishment of the Anadolu  S i g o r t a S i r k e t i - A n o t d l i a Insurance Company - w i t h a c a p i t a l of h a l f a m i l l i o n of T u r k i s h L i r a s . In 1929 i t p a r t i c i p a t e d with l o c a l insurance companies i n the establishment of a M i l l l Reasurans Turk Anonlm S l r k e t ! - The'National Reinsurance As'sociation. The l a t t e r was c a p i t a l i z e d at one m i l l i o n of Tu r k i s h L i r a and i s the only reinsurance undertaking In the Pro f . Kuyueak Hazim Atif,.. op_. c i t . , p. 2 5 9 . country. This bank has also played an important r o l e i n the f i n a n c i n g of governmentally owned r a i l r o a d s both as d i s t r i -butor and i n v e s t o r , and has a s s i s t e d i n maintaining the mar ket f o r other government issues as w e l l . In 191+6 i t under-took,, on behalf of the General E l e c t r i c Company, to f i n a n c e the establishment of" the- f i r s t e l e c t r i c l i g h t bulb f a c t o r y i n Turkey. A f t e r 1939 the bank discontinued i t s ' p a r t i c i p a -t i o n i n the ownership of the i n d u s t r i a l concern by s e l l i n g i t s shareholdings to the- government and p r i v a t e i n d i v i d u a l s The t a b l e below gives the- summary of the tremendous growth which has been experienced by the Bank. TABLE XIX PRINCIPAL ASSETS AND LIABILITIES OP THE BUSINESS BANK OP TURKEY, BY SELECTED YEARS, 1 9 2 4 - 1 9 5 3 * . : ( a l l .amounts-in m i l l i o n of Turkish- L i r a s ) Ye ars r a i a m C a p i t a l and Reserves, .Deposits Loans and Inv es.tmen t s 1924 1 .0 2 . 5 1 .0 1929 4 . 9 3 1 . 9 1934 7 . 7 5 3 . 3 3 3 - 9 1939 8.8. 6 5 . 5 3 9 . 2 1914 10.1+ 171 .3 l k l . " 9 -1946- 1 7 . 2 2 u o . I 1 . 1 6 3 . 0 1949 1.953,. - , 2 3 . 3 2 3 5 . 0 2 4 3 . 0 4 2 . 8 . 61+1+-0 6JJ7 • 0 ""Prof. Kuyueak Hazim A t i f , . op. c i t . , pp. 2 6 5 - 6 6 ; .and Docent -Dr. Bard a -Suleyman,. op,.- c i t . , . pp.- 35~36-37 • * • " Prof. Kuyueak Hazim A t i f , ojo. c i t . , pp. 259-26.0. Loc. c i t . 91 The earning c a p a c i t y of the bank i s shown i n the f o l l o w i n g t a b l e . TABLE XX PROFITS AND DIVIDENDS OF THE BUSINESS BANK OF TURKEY, BY SELECTED YEARS, 1924-1953* • - — -.- •: ( a l l amounts i n m i l l i o n of T.L.) .......... Years Paid i n C a p i t a l and Reserves Gr o ss P r o f i t Net P r o f i t Net P r o f i t as % of C ap . and .Res.. 192i|. 1 .0 0 . 0 3 8 0 .017 1.7 1928 4 - 3 2 . 5 1-4 3 2 . 5 1932 7-4 2 . 4 0 . 6 8 . 1 1939 8 . 7 6 . 9 0 . 9 1 0 . 3 1945 11 .1 1 5 . 6 2 . 1 1 8 . 9 1949 2 3 . 3 2 3 . 1 3 . 4 1 4 . 5 1953 4 2 . 8 4 6 . 1 5 . 2 1 2 . 2 "Prof, Kuyueak Hazim A t i f , ojo. . c i t ; , pp. 265-266-and Docent Dr. .Barda Suleyman,. op. c i t . . , p. 3 9 . c) Yapl ve K r e d i Bankasi -.The B u i l d i n g and.Credit Bank The Yapl ve K r e d i Bankasi was e s t a b l i s h e d on September 9-, 1944- i t i ' s o n e °f ^ a e more- recent a d d i t i o n s to the banking system of Turkey, and was founded w i t h the cooperation of the Dogan Insurance Company. I t s nominal c a p i t a l at the time of establishment was two m i l l i o n T u rkish L i r a s . The bank i s p a r t i c u l a r l y known f o r i t s i n t r o d u c t i o n , of a d v e r t i s i n g process as a means of s o l i c i t i n g depositors-' accounts. This was a complete novelty i n the Turkish bankin f i e l d . But the other banks followed suit and i t is now quit commonplace in Turkey. While the bank was originally est-ablished to finance the building industry and encourage home ownership.,, i t has since expanded the scope of i t s operations to include a general banking business as well. It now operates 86 branches and agencies and holds eleven 22 per cent, of the country» s' deposits . Its remarkable growth is demonstrated in the following table. TABLE XXI PRINCIPAL ASSETS AND LIABILITIES OP THE BUILDING AND CREDIT BANK, YEARS 191+1+-1955* (in million of T.L.) Years Paid in Capital and Reserves Deposits Loans and Investments 191+1+ 2 6 . 1 3 . 1 191+5 2 ll+.O 9 . 0 1947 2 3 6 . 0 3 7 . 5 1949 5 . 3 .6.0.0 5 1 . 3 1951 5 . 2 121+.3 8 3 . 0 1953 1 6 . 0 2 7 0 . 3 197-0 1951+ • . 21+.0 .,- 3 0 8 . 5 2 5 3 . 8 . Docent Dr. Barda Suleymah,. op. c i t . , pp. 7 7 - 7 8 - 7 9 . • -^Docent Dr. Barda Suleyman, Finance and Economic Periodicals, Istanbul, 1955> No. 1 2 , pp. 76-77. , The f o l l o w i n g supplemental record of the bank's earning r e v e a l s that the remarkable growth i n i t s operations has been matched by i t s e q u a l l y remarkable growth i n gross and net earnings. TABLE XXII PROFIT AND DIVIDENDS OF THE BUILDING AND CREDIT BANK BY YEARS, 191+5-195V-( a l l amonnts i n thousand T u r k i s h L i r a ) Paid i n C a p i t a l Gross Net Net P r o f i t as % Years and Reserves P r o f i t P r o f i t of Cap. and Res. 191+5 2 , 0 0 0 l i 0 9 l + H+5 7 . 2 5 191+7 2 , 0 0 0 2 , 2 6 7 1+21+ 2 1 . 2 191+9 5 , 3 o o 6:,288 755 11+.2 1951 5 , 2 0 0 13 , 2 2 1 1 ,773 31+.0 1953 16,-000 20,351+ 2 , 5 1 2 1 5 . 7 1951+ 21+, 000 3 0 , 3 5 5 l+,839 • 2 0 . 1 ""Do cent Dr. Bard a Suleyman, op. c i t . , p. 8 l d) Turkiye S i n a i Kalklnma Bankasi - The I n d u s t r i a l Develop- ment Bank of Turkey The I n d u s t r i a l Development Bank of Turkey was e s t -a blished i n 1950 by p r i v a t e i n d i v i d u a l s to finance p r i v a t e e n t e r p r i s e s i n the i n d u s t r i a l f i e l d . I t has an authorized c a p i t a l of T;.L. 25 m i l l i o n , of which T.L. 1 8 . 8 m i l l i o n has been paid i n . I t i s one of the i n s t i t u t i o n s through which the M a r s h a l l Plan funds and loans from the World Bank f o r the r e c o n s t r u c t i o n and development have been made a v a i l a b l e 23 . . to l o c a l borrowers-. It does not s o l i c i t deposits from the general p u b l i c . The extent of the bank's' operations' i s shown i n the following table.' TABLE XXIII PRINCIPAL ASSETS AND LIABILITIES OF THE INDUSTRIAL DEVELOPMENT BANK OF TURKEY, YEARS 1 9 5 3 - 1 9 5 5 * ( i n m i l l i o n of T.L.) Years Paid i n Ca p i t a l and Reserves Obligations Loans' ' Net P r o f i t 1953 12.6 62 .1 8 5 . 5 1 .0 1951+ 1 5 . 8 8 1 . 0 117 .0 2 . 8 1955 1 9 . 3 . 111 .9 131.6 1+.8 "Monthly Report of the Central Bank of the Turkish Republic, No. 5 , May 1956, Ankara, pp. 1 6 - 1 9 . The progress' made by the domestically owned private banks as a group during the- period under review i s brought out i n Table XXIV. 3. The .Foreign: Banks The foreign banks" now operating i n Turkey are: Osmani1 Bankasi - The Bank of Ottoman formed i n 1 8 6 3 , Selanlk Bankasi - Bank of Selonika - formed i n 1 8 8 8 , Banka 23Monthly Report of the Central Bank of the Turkish Republic, No. 5 , May 1956> Ankara, pp. 16-62. 95 TABLE XXIV PRINCIPAL ASSETS AND LIABILITIES OF THE DOMESTICALLY OWNED PRIVATE BANKS OF TURKEY BY YEARS, 1 9 3 9 - 1 9 5 5 * ( i n m i l l i o n of T. L.) . -. Years C a p i t a l and Reserves Deposits Loans L i q u i d Assets " I n - • v e s t -ment. Annual Earn-ing 1939 20 74 67 17 18 1.3 1945 25 216 181 71 23 3 1914,9 56 355 309 131 28 7 1951 80 62ii I163 308. ' 3 6 10 1952 IOI4. 86.1 701 3 3 9 4 6 12 1953 130 1,198 1 , 0 6 3 451+ 6 8 17 1951+ 199 1 A 2 3 9 7 6 6 8 3 6 4 26 1955 361 . 1 ,673 1,137 775 88 32 "'Do cent Dr. Bard a Suleyman, op, c i t . , p. 125; ; and Monthly.Report of the C e n t r a l Bank of the T u r k i s h Republic, No. 5-, May 1 9 5 6 , Ankara, pp. 1 9 - 2 1 . Komerclyale I t a l y a n a - Commercial Bank of I t a l y , Banka d l  Roma - Bank of Roma, Hollandsehe Bank Uni N.V.„ S a r k i  Karip Ticaret. Bankasi - The Commercial Bank of the Near East L t d . , and American Express Company. a) Economic Importance In 1955 these banks had a t o t a l of f i f t y branches and agencies and t h e i r p a i d i n c a p i t a l and reserves were T.L. 2 7 . 7 m i l l i o n . The amount of t h e i r d e p o s i t s , i n the same year, was T.L. 288.6 m i l l i o n and c o n s t i t u t e d 17 .3 per cent, of the t o t a l commercial accounts, h e l d by a l l banks i n Turkey. 2^" The extent of the recent growth of these f o r e i g n i n s t i t u t i o n s i s revealed i n the f o l l o w i n g t a b l e . TABLE XXV PRINCIPAL ASSETS AND LIABILITIES OP THE FOREIGN OWNED BANKS IN TURKEY, BY SELECTED YEARS, 1 9 3 3 - 1 9 5 5 * ( i n m i l l i o n of T.L.) Years Paid i n C a p i t a l and Reserves . Deposits Loans 1933 3 9 . 3 . 1 3 8 . 3 -1945, 8 . 4 8 0 . 9 4 6 , 4 1953 1 9 . 5 2 4 6 . 5 1 7 8 . 8 1954 ZZ.O 2 5 6 , 8 1 7 0 . 6 1955 •27.7 288 . 6 1 7 7 . 8 "Prof. Kuyueak Hazim A t i f * op,, c i t . .pp. 1 6 7 - 1 6 8 - 1 6 9 ; and Monthly Report of the C e n t r a l Bank of the- T u r k i s h R e p u b l i c , No, 5 , May 1956>• Ankara,, pp. 1 7 - 4 1 - 4 3 . b) The Bank of Ottoman Under the Republic; Of a l l the f o r e i g n banks i n Turkey the Bank of Ottoman i s by f a n the most important. As noted i n the review, of the antecedent p e r i o d , t h i s British owned and chartered i n s t i t u t i o n was granted the e x c l u s i v e r i g h t of note issue and other banking p r i v i l e g e s i n r e t u r n f o r f i n a n c i a l support of the Government of Su l t a n Abdulmecid a f t e r the Turko-Russian ^ M o n t h l y Report of the C e n t r a l Bank of the Tu r k i s h Republic, No. 5,- May 1 9 5 6 , Ankara, pp. 1 7 - 4 3 . war of 1863,, and. to a l l i n t e n t s arid purposes u l t i m a t e l y bo came both the government's bank and i t s f i s c a l agent.. The r e v o l u t i o n which has taken place i n T u r k i s h banking i s nowhere b e t t e r e x e m p l i f i e d than i n the changing f u n c t i o n s of the s i n g u l a r l y i n f l u e n t i a l i n s t i t u t i o n . Under the terms of the o r i g i n a l 1863 agreement between the government arid the bank,, the l a t t e r performed the du t i e s of a p u b l i c Treasury department, r e c e i v i n g taxes and paying government o b l i g a t i o n s both at home and abroad. I t extended long term c r e d i t s to the government on the s e c u r i t y of Treasury bonds and short term funds to the extent of £00,.000 25 S t e r l i n g on an open account,. Because of f i s c a l d i f f i c u l t i e s a r i s i n g i n connection w i t h the War of 1878,. the bank was p r e v a i l e d upon to guarantee T u r k i s h ob l i g a t i o n s ' abroad' to the extent of iiO m i l l i o n 26 pounds S t e r l i n g , However,, t h i s ' very s u b s t a n t i a l commit-ment was' hot made without noteworthy concessions on the part of the T u r k i s h Government. The bank was' given the e x c l u s i v e p r i v i l e g e of d i s t r i b u t i n g the government»'s bond s,. was allowed to place- one of i t s o f f i c i a l s ' on the Budget Commission and was' given the p r i v i l e g e of naming the T u r k i s h Attorney-General. In a d d i t i o n , the government became a guarantor on the notes issued by the Bank of Ottoman, the signature of the Attorney-' 25pro-f'. Kuyucak Hazim A t i f , , CJD. c i t , ... p. 351 • 2 ^ I b i d . , p. 353. 98 General appearing along w i t h that of the respoi s i b l e o f f i c i a l s of the bank. In order to carry out i t s p a r t of the agreement the Bank of Ottoman secured the c o l l a b o r a t i o n of i t s asso-c i a t e , the Austro-Ottoman Bank, and increased i t s c a p i t a l to 27 twenty m i l l i o n pound S t e r l i n g . This l a t t e r agreement continued In -effect even a f t e r the found a t i o n of the P u b l i c Debt Department i n l88l. Mean-while,, the bank took over the a d m i n i s t r a t i o n of the country's salt.,, tobacco,, and l i q u o r monopolies i n order to ensure that revenues would be a v a i l a b l e t:o meet the government 28 o b l i g a t i o n s . While- the bank continued to e x e r c i s e the note issue p r i v i l e g e u n t i l q u i t e r e c e n t l y , i t appears to have pursued a p o l i c y of lessened p a r t i c i p a t i o n i n the f i s c a l a f f a i r s of the T u r k i s h Government a f t e r the t u r n of the century. I t could not, of course, a c t u a l l y p a r t i c i p a t e In the f i n a n c i n g of T u r k i s h Government i n World War I . In March,. l92i|.-,. the bank entered i n t o an agreement w i t h the Republican Govern-ment which extended i t s l i f e to 1935, but was required to surrender any e x c l u s i v e r i g h t s and p r i v i l e g e s which i t was given by the Ottoman r u l e r s , I n c l u d i n g r e p r e s e n t a t i o n In the Budget., .Commission.,,, nomination. of, the., p u b l i c o f f i c i a l s * . , and,,, 2 7 p r o f . Kuyueak Hazim A t i f , . op_. c i t . , pp. 354"355-356. 2 8 I b l d . , p. 357-99 a d m i n i s t r a t i o n of the- government monopolies:. I t was a l s o required to r e c r u i t mora than h a l f of I t s personnel from r e s i d e n t Turkish-Muslems 'and to submit i t s o f f i c i a l s * appointments, f o r the approval of the M i n i s t e r of Finance. The government i n t u r n extended the l e g a l tender q u a l i f i -c a t i ons of the bank's' notes and granted i t the p r i v i l e g e of extending loans to both the government and government's 29 c r e d i t agencies. J In 1931 the' government .breached, what In f a c t had been, an e x c l u s i v e p r i v i l e g e of issue by e s t a b l i s h i n g the C e n t r a l Bank of' the T u r k i s h Republic, and two years l a t e r Imposed some s i g n i f i c a n t r e s t r i c t i o n on the scope- and f r e e -dom of i t s : operation. Under the terms: of an agreement made on June 5 , 1933, the bank was, required to maintain at l e a s t one-half of i t s c a p i t a l funds; i n T u r k i s h L i r a s and riot a l l o w t h i s fund to f a l l below 3«5> m i l l i o n . I t was a l s o required to maintain a minimum of t h i r t y branches. Three members' of i t s Board of Governors were to be appointed by the government and the bank's D i r e c t o r General had to be. 30 approved by the- M i n i s t r y of Finance. In I9I4-6 the government requested that the hank redeem,,it;s:: outstanding notes . and,:  since . that,,. time.,.it, has,. 2 9 P r o f . Kuyucak Hazim A t i f , op_. c i t . . pp. 357-358 3°ibid ... pp. 361 to 36J4,. 100 been operated as a p u r e l y p r i v a t e venture with, no except-i o n a l p r i v i l e g e s . I n f a c t , i t would appear to be e x i s t i n g somewhat at the sufferance of the government and under i t s • s u r v e i l l a n c e . However;, i t s t i l l r e t a i n s a p r e s t i g e earned through many years of uninterrupted service- and i s now known p r i m a r i l y as an i n t e r n a t i o n a l bank s p e c i a l i z i n g i n the f i n a n c -ing of e x t e r n a l trade and has branches i n a l l the Near-Eastern c o u n t r i e s , i . e . , Egypt, Iraque, P e r s i a , T r a n s j o r d a n i a , P a l e s t i n e , and Greece-. I t now has a c a p i t a l and reserve of T.L, 10 m i l l i o n , operates 37 branches and agencies, and handles as much business: i n Turkey as a l l the other 31 f o r e i g n banks combined. i | . Summary When the p r i n c i p a l assets and l i a b i l i t i e s of a l l the p r i v a t e banks in. Turkey, both domestic and f o r e i g n , are -brought together, we obtain a more or l e s s s e l f explanatory summary of the remarkable progress made by the p u r e l y p r i v a t e establishments under the Republican regime, as set f o r t h i n Table XX?I. A comparison of the t o t a l s given f o r the years 1939 and 1955 reveals that paid i n c a p i t a l and reserves have, increased by 1,256 per -cent.; and deposits by 2,650 per cent; loans by 1,963 P-sr cent., and p a r t i c i p a t i o n s by lj.8-7 per cent. Even.; af t er .allowing f o r , the very, considerable, i n f l a t i o n which , : ^ 1 P r o f , Kuyueak Hazim A t i f , . op_. c i t . , pp. 363-366; and Monthly Report of the C e n t r a l Bank of the; T u r k i s h Republic,. No. 5 , May 1956,. Ankara,, p.. 17. TABLE XXVI PRINCIPAL ASSETS AND LIABILITIES OF ALL. THE PRIVATE BANKS IN TURKEY, BY SELECTED YEARS, 1 9 3 9 - 1 9 5 5 * ( i n m i l l i o n of T.L.) 1939 1953 1951+ 1955 Paid i n C a p i t a l and .20** Reserves 11+7.5 1 9 0 . 2 2 5 1 . 2 Deposits 71+ 1,11+1+ -3 1 , 6 7 9 . 8 1 , 9 6 1 . 5 Loans 67 9 3 1 . 8 1,11+6.8 1,315.1+ L i q u i d Assets 17 61+5.9 9 7 0 . 1 1 , 0 5 1 . 6 P a r t i c i p a t i o n s 18 , 58.1+ 61+.0 8 7 . 8 Net P r o f i t 1.3 2 2 . 6 3 0 . 7 3 7 - 0 '"'Monthly Report of the C e n t r a l Bank of the T u r k i s h Republic, No. 5 , May• 1956.,. Ankara, pp. 1 9 - 2 1 ; and Docent Dr. Barda Suleyman, op. C i t . , p. 1 2 5 . """""The f i g u r e shows the Nominal C a p i t a l at - that year. has taken place since World War I I , there i s s t i l l evidence of phenomenal r e a l growth. CHAPTER V I THE CENTRAL BANK OP THE TURKISH REPUBLIC The C e n t r a l Bank o f the T u r k i s h R e p u b l i c was e s t a b -l i s h e d i n A n k a r a on O c t o b e r 3 , 1 9 3 1 , t o f i l l a n o b v i o u s gap In the c o u n t r y ' s b a n k i n g and c r e d i t s t r u c t u r e and to p l a c e the c o n t r o l and r e g u l a t i o n of the c u r r e n c y i n government h a n d s . W i t h o u t such an i n s t i t u t i o n the government c o u l d n o t have executed i t s p l a n s f o r the economic development of the c o u n t r y , n o r c o u l d I t have s u p p o r t e d the s e v e r a l quasi-pub 2 1 c banks t h r o u g h which i t sought t o f i n a n c e the v e n t u r e s d e r i v e d t h r o u g h these, plans. . In the p a r a g r a p h s w h i c h f o l l o w I have examined i n d e t a i l the p r o v i s i o n s of the e n a b l i n g A c t under w h i c h the bank was e s t a b l i s h e d , p a r t i c u l a r l y t h o s e r e l a t i n g t o c a p i t a l i z a t i o n and o w n e r s h i p , t o o r g a n i z a t i o n and c o n t r o l , and t o the b a n k ' s p o w e r s , d u t i e s , and r e s p o n s i b i l i t i e s . I have a l s o r e c o r d e d the n a t u r e and e x t e n t o f the b a n k ' s o p e r -a t i o n s . 1. P r o v i s i o n of t h e . C e n t r a l Bank A c t The preamble to the e n a b l i n g A c t , under w h i c h the bank was e s t a b l i s h e d , r e c i t e s the f o l l o w i n g . i n t e n t i o n s on the p a r t o f i t s a u t h o r s : 1 (1) O r g a n i z e and r e g u l a t e the money market and c i r c u l a -t i o n of money, (2) S t a b i l i z e the d i s c o u n t r a t e , (3) A c t as b a n k e r and the f i s c a l agent of the government, (I).) To a s s i s t the government i n the s t a b i l i z i n g o f the v a l u e of T u r k i s h c u r r e n c y . 2 T h e C e n t r a l B a n k . o f . t h e T u r k i s h R e p u b l i c A c t . Appendixes and M o d i f i c a t i o n ' s , A n k a r a 1955, A n k a r a Basim ve C i l t E v i , S e c t i o n I , A r t i c l e 2 . 102 103 In order to c a r r y out these r e s p o n s i b i l i t i e s and f u n c t i o n s , the bank was given the p r i v i l e g e of i s s u i n g l e g a l tender notes; was designated as the reserve- depository and c l e a r i n g agent of the other banks; and was granted the power to f i x the discount and i n t e r e s t rates that were- to- p r e v a i l i n the l o c a l money market; and the r i g h t to engage .in both r e d i s c o u n t i n g and investment market a c t i v i t i e s . I t was also authorized to e s t a b l i s h .branches w i t h i n the country and agencies abroad. a) C a p i t a l i z a t i o n and Ownership, of the Bank The bank i s a p u b l i c c o r p o r a t i o n w i t h an authorized c a p i t a l of T.L. l 5 m i l l i o n , a l l of which has been paid i n . T h i s l a t t e r sum i s divided i n t o 150,000 shares w i t h par value 2 of T.L. 100. The p o t e n t i a l shareholders of the bank were div i d e d i n t o four main groups.3 Group A c o n s i s t s of govern-mentally owned agencies, whose combined s u b s c r i p t i o n i s l i m i t e d to 2^ per cent, of the t o t a l number of shares' out standing A Group B. c o n s i s t s of the p r i v a t e banks whose s u b s c r i p t i o n i s not l i m i t e d . G r o u p C c o n s i s t s of the f o r e i g n banks whose s u b s c r i p t i o n may not be i n excess' of ten per cent, of the t o t a l outstanding.^ Group D was made up of private- enter-p r i s e s and i n d i v i d u a l s — T u r k i s h c i t i z e n s . ? 2The C e n t r a l Bank of the T u r k i s h Republic Act. Appendixes and M o d i f i c a t i o n s , Ankara 1955, Ankara Basim ve C i l t E v i , S e c t i o n IV, A r t i c l e 21 . 3 I b i d . , S e c tion IV, A r t i c l e 25. . ^ I b I d . , S e c t i o n IV, A r t i c l e .26. ^ I b i d . , S e c t i o n IV, A r t i c l e 27. 6 I b l d . , S e c t i o n IV, A r t i c l e 29 . 7 I b i d . . S e c t i o n IV, A r t i c l e 30 . The shares may be t r a n s f e r r e d from one group to another, subject to the r e s t r i c t i o n that the holdings of the government may not exceed 25 per cent, of the t o t a l and those of the f o r e i g n owned banks not more than 10 per c e n t . 8 I t thus appears that the government ownership and the c o n t r o l of the f o r e i g n banks was not contemplated by the authors of the Act. Y e a r l y changes i n the d i s t r i b u t i o n of the ownership of the shares of the C e n t r a l Bank of the T u r k i s h Republic i s shown i n the f o l l o w i n g t a b l e : TABLE XXVII THE DISTRIBUTION OP SHARES OF THE' CENTRAL BANK OP THE TURKISH REPUBLIC INTO DIFFERENT GROUPS, BY SELECTED YEARS 1938-1955* Groups 1938 194.6 1953 .1954 . 1955 A 35,975 36,6^5 36,713 36,713 36,713 B 57,317 57,259 57,353 57,353 58,024 C 13,948 9,765 8,412 8,212 8,.212 D .42.,760 . 46.331 47.522 . 47,7.22 . .47 ,05l .. T o t a l . .150,000 l 5 0 , 0 0 0 150,00Q- l 5 0 , 0 0 0 .. l50,Q00 """Monthly. Report of the C e n t r a l Bank of the T u r k i s h Re p u b l i c , No. 5 , May 1956, Ankara, p. 13-In 1955 the d i s t r i b u t i o n of shares by groups was as f o l l o w s : A shareholders 24-5 per cent., B. shareholders 38.7 per cent.., C shareholders 5-5 per cent., and D. shareholders 31.3 per cent. P r i v a t e e n t e r p r i s e s , p u b l i c and p r i v a t e domes-t i c banks thus have- the seventy per cent, o f the t o t a l out-standing, and as f a r as v o t i n g r i g h t s are concerned, would appear to be able to d i c t a t e the p o l i c i e s ' of the bank. In . 8The Ce n t r a l Bank of the Turkish .Republic Act. Appendixes and M o d i f i c a t i o n s , Ankara 1955, Ankara Basim ve-C i l t E y i , S e c t i o n IV, A r t i c l e 33- ' . 105 1955 the number of shareholders of group A was only two. Group B shares were divided among 19 banks and group C among the seven f o r e i g n banks. The number of shareholders i n group D was 7 , - 0 9 5 . 9 b) Organization and Structure, The bank's f u n c t i o n a l o r g a n i z a t i o n c o n s i s t s o f : (1) A General Assembly of shareholders, (2) A Beard of Governors, (3) A Board of Comptrollers, (1±) A C r e d i t and Discount Committee, (5) A Management Committee, (6) A D i r e c t o r General and h i s a s s i s t a n t s . 1 ^ The General Assembly of shareholders' meets each year to review and. approve the .bank"'s annual r e p o r t , to e l e c t or extend the terms of the Board of Governors, and to auth-o r i z e such changes as may be required i n the general p o l i c i e s and r e g u l a t i o n s of the bank. Any i n d i v i d u a l shareholders i n the Assembly must hold at l e a s t ten shares i n order to cast one vote, and may not cast more than f i f t y votes r e g a r d l e s s of the h o l d i n g . 1 1 The a u t h o r i t y of the bank i s vested i n an eight, member Board of Governors'. The chairman and one other member are appointed by the M i n i s t e r of Finance with the approval of the T u r k i s h Cabinet, and presumably represent Group-A shareholders. One member i s appointed- by the 9Monthly Report of the C e n t r a l Bank of the T u r k i s h Re p u b l i c , No. 5 , May 1 9 5 6 , Ankara, p. 13-IQThe C e n t r a l Bank of the Turkish Republic Act. Appendixes and M o d i f i c a t i o n s , Ankara 1 9 5 5 , Ankara Basim ve C i l t E v i , Section V I I , A r t i c l e 51+. 1 1 I b i d . , S e c t i o n V I I , A r t i c l e s . 5 8 - 5 9 . 106 M i n i s t e r of Economics and represents the Chamber of Commerce and i n d u s t r y . Two members are appointed ,by the A g r i c u l t u r a l Cooperatives among the l e a d i n g a g r i c u l t u r i s t s . The remaining three- members of the board are chosen by the B, C, D shareholders, I.e.,. by the p r i v a t e banks, commercial i n s t i -tea 13 12 t u t i p n s , and T u r k i s h c i t i z e n s . The term of o f f i c e i s three years, and members may be reappointed. The Board of Comptrollers" comprises f o u r members' who are e l e c t e d by the B, C, and D 'shareholders of the bank. They hold e f f i c e f o r two years but may not be r e - e l e c t e d f o r continuous terms of o f f i c e . They are charged w i t h the duty of a u d i t i n g the- books of the bank and r e p o r t i n g on the conduct of i t s p r i n c i p a l o f f i c i a l s . The C r e d i t and Discount Committee of the bank i s composed of f i v e members, under the presidency of the D i r e c t o r General. Two; members of the committee are selected from a s s i s t a n t general d i r e c t o r s of the bank. This committee i s charged w i t h the r e s p o n s i b i l i t i e s of f i x i n g discount,. rediscount,., and i n t e r e s t rates p r e v a i l i n g throughout the l5 country. The Management Committee i s composed o f the- depart-ment heads of the bank and has r e s p o n s i b i l i t i e s f o r the 1 2The C e n t r a l Bank of the T u r k i s h Republic Act. Appendixes and Mod i f i c a t i o n s , . Ankara 1955, Ankara Basim ve C i l t E v i , S e c t i o n V I I , A r t i c l e s 63-64-65'. 1 3Ibid., S e c t i o n V I I , A r t i c l e 6 5 . ^ I b l d . . . S e c t i o n V I I , A r t i c l e s 71-72-73. 1 % b i d . . , S e c t i o n VII,. A r t i c l e s 74-75. I 107 appointment of the bank's personnel and f o r c r e d i t s extended by the bank. The D i r e c t o r General i s appointed by the President of the T u r k i s h Republic upon the recommendation of the Board" of Governors of the bank and must be approved by the T u r k i s h Cabinet. He i s appointed f o r a term of f i v e years. He can be n e i t h e r a member of Parliament nor c i v i l servant during h i s term of o f f i c e . He i s not permitted to hold shares i n 17 the bank. c) Powers, P r i v i l e g e s and Duties As a c e n t r a l i n s t i t u t i o n , , the bank q u i t e n a t u r a l l y was given the p r i v i l e g e of i s s u i n g l a w f u l money,, the du t i e s of a c t i n g as f i s c a l agent of the government, and of p r o v i d -in g a reserve and c l e a r i n g center f o r the other ordinary-banking i n s t i t u t i o n s . 1. The Issuance of Lawful,Money In e x e r c i s i n g the currency p r i v i l e g e , t h e C e n t r a l 1 Pi Bank of the Turkish Republic may issue and tender i t s notes: (1) i n payment f o r purchases of gold and advances made against deposits of gold . (2) i n payment f o r purchases of f o r e i g n exchange c o n v e r t i b l e i n t o gold. (3) i n payment f o r purchases of nonconvertible • • f o r e i g n c u r r e n c i e s . x oThe C e n t r a l Bank of the Turk i s h Republic Act. Appendixes and M o d i f i c a t i o n s , Ankara 1955>• Ankara Basim ve C l l t E v i , S e c t i o n V I I * A r t i c l e 76. J -Tlhld., S e c t i o n V I I , A r t i c l e s - 77-78. J-Qlbld., "Section I I I , A r t i c l e 20* S e c t i o n V* A r t i c l e s 3j + _3^_3 6 _3 7- T o-j 9_| + 0.-108 (i+) In payment f o r red i s counted commercial and a g r i c u l t u r a l b i l l s . (5>) i n payment f o r discounted Treasury b i l l s . (6) as: advances against the bonds and s e c u r i t i e s of the T u r k i s h .Government, and those of govern-mentally owned and sponsored i n s t i t u t i o n s , , which, have been guaranteed by the government. The amount of notes issued by the bank may riot exceed i t s p a i d i n c a p i t a l and reserves and i t s holdings of Treasury o b l i g a t i o n s . This p r o v i s i o n could l i m i t the advances made to banks on the c r e d i t of private- borrowers,, but not the- advances, made on the s e c u r i t y of government notes and bonds. While the bank has at a l l times maintained a sub-s t a n t i a l stock of gold and f o r e i g n exchange* i t is- not required to maintain any nominal reserve against i t s out-stand irig notes. Like the issues of most c e n t r a l bariks i n the -world today, they are, i n f a c t , and to some extent, i n theory, i n c o n v e r t i b l e and represent f o r the most p a r t a monetization of the n a t i o n a l .cr e d i t . i i . F i s c a l Duties The- C e n t r a l Bank was- designated as* the banker and f i s c a l agent of the T u r k i s h Government, and of government-a l l y sponsored i n d u s t r i a l and commercial e n t e r p r i s e s , i n c l u d -ing s t a t e monopolies. I t was al s o designated as banker and f i s c a l agent to such m u n i c i p a l i t i e s as could a v a i l them-s e l v e s of i t s s e r v i c e s . Iri these c a p a c i t i e s , i t was author-ize d to c o l l e c t taxes,, pay o b l i g a t i o n s , and to underwrite and d i s t r i b u t e t h e i r long term o b l i g a t i o n s . I t was a l s o 109 19 authorized to provide t h e i r needs f o r short term c r e d i t . On current advances to the Government Treasury, the bank was o r i g i n a l l y l i m i t e d to f i f t y per cent, of i t s c a p i t a l and reserves. In 1955 t h i s l i m i t a t i o n was set aside i n fa v o r of a l e s s r e s t r i c t i v e f i f t e e n per cent, of the' N a t i o n a l Budget. i i i . Reserve Depository, C l e a r i n g Center, and Bankers' Bank Under the p r o v i s i o n of the Banking Act a l l p r i v a t e banking i n s t i t u t i o n s became t r i b u t a r i e s of the C e n t r a l Bank by v i r t u e of the requirement that each such i n s t i t u t i o n main-t a i n a reserve on deposit w i t h the C e n t r a l Bank and use the l a t t e r as a c l e a r i n g center. These t r i b u t a r i e s were a l s o t i e d to the C e n t r a l Bank by v i r t u e of t h e i r need f o r the l a w f u l money i n which most money payments i n T u r k e y are made. The reserve requirement i s now f i x e d at twenty per cent, of the t r i b u t a r y bank's deposits and the l a w f u l cur-rency required by each bank i s obtained through r e d i s c o u n t -ing and s e c u r i t y market dealings as explained more f u l l y under these headings i n subsequent paragraphs. C l e a r i n g houses are provided at each of the bank's' branches and i t s head o f f i c e . 1 9The C e n t r a l Bank of the Tu r k i s h Republic Act. Appendixes' and M o d i f i c a t i o n s , Ankara 1 9 5 5 , Ankara Baslm ve C i l t E v i , Section I , A r t i c l e . 2 , S e c t i o n V, A r t i c l e 3 4 , paragraph 1, Section V",. A r t i c l e 5 l , and Appendix to the C e n t r a l Bank Act, No. 4 4 3 1 , A r t i c l e 1. 2 0 I b l d . , .Section V, A r t i c l e 3 4 , paragraph . 2 , and Appendix to the Act, May 1 9 5 5 , No. 6 5 4 4 , A r t i c l e : I I . 110 d) Instruments of Economic C o n t r o l The C e n t r a l Bank of the Turkish Republic, l i k e other-c e n t r a l i n s t i t u t i o n s , Is charged w i t h the r e s p o n s i b i l i t y of maintaining f i n a n c i a l s t a b i l i t y w i t h i n the: country and the i n t e g r i t y of the- T u r k i s h currency* and i s equipped w i t h the c o n t r o l instruments w i t h which i t i s g e n e r a l l y presumed those r e s p o n s i b i l i t i e s can be c a r r i e d out. These c o n s i s t of the power to f i x i n t e r e s t , discount and rediscount r a t e s , to regulate the reserves of the t r i b u t a r y banks, to engage In s e c u r i t y market d e a l i n g s , and to determine the a v a i l a b i l i t y and p r i c e of f o r e i g n exchange. The p r o v i s i o n s of the C e n t r a l Bank Act With respect to the e x e r c i s i n g of these- p r e r o g a t i v e s , are as f o l l o w s : 1. Discount Rate; F i x a t i o n and E l i g i b l e Papers Owing to the f a c t that bank-notes are the predominant medium of payment i n Turkey j the bank's' d i s c o u n t i n g and r e d i s c o u n t i n g operations c o n s t i t u t e an important p a r t of i t s ordinary a c t i v i t i e s ' and the r a t e s paid by the customer 1 banks are a s i g n i f i c a n t f a c t o r i n r e g u l a t i n g the volume of paper o f f e r e d . Discount and rediscount r a t e s to customer banks are f i x e d by the Board of Governors upon* the recom-mendation of the C r e d i t and Discount Committee of the bank, and are announced to the p u b l i c i n the O f f i c i a l Gazette of the government. The r a t e s are uniform throughout the' country. Rates charged on advances made to the Treasury and t o the governmentally sponsored i n s t i t u t i o n s are subject to nego-t i a t i o n s between the Board of Governors and the M i n i s t r y of I l l v 2 l F mane e. The e l i g i b i l i t y p r o v i s i o n s of the C e n t r a l Bank Act. appear to be designed as much to encourage the development of commerce and i n d u s t r y as to reg u l a t e the .amount of paper o f f e r e d . The .customer banks may present o r d i n a r y documentary b i l l s , w i t h m a t u r i t i e s of not more than 120 days-, two name papers secured by warehouse r e c e i p t s , three name papers supported by insurance p o l i c i e s ; and current advances to i n d u s t r i a l and mining; ventures-, to s m a l l manufacturers and 22 to a g r i c u l t u r a l e n t e r p r i s e s . The: amount, of these- name papers' which the bank may disccunt may not. exceed f i f t y per cent, o f i t s b i l l ' s p o r t f o l i o , , and the- minimum amount i s f i x e d at ten per cent. The m a t u r i t i e s of a g r i c u l t u r a l b i l l s , may hot exceed nine months and t h e i r amount may not exceed f i f t e e n per cent, of the bank's c a p i t a l and not more than Z% per cent, of 23 the commercial b i l l s ' p o r t f o l i o . Treasury b i l l s presented, f o r rediscount by the customer banks must have a m a t u r i t y .of at l e a s t 90 days. While the- Act s p e c i f i e s that the amount of such discounts may not exceed the p a i d i n c a p i t a l and reserve's of the 2 1The. C e n t r a l Bank of the T u r k i s h Republic Act.. Appendixes and Modifications-, Ankara 1 9 5 5 , Ankara Basim v.e G i l t E v i , Section. V, A r t i c l e s li9~£0. 2 2 I b i d . , S e c t i o n V, A r t i c l e s 3 8 - 3 9 . 2 3 I b i d . , S e ction V,- A r t i c l e 38-. 112 C e n t r a l Bank, the amount pan be increased as. much as: three-f o l d on the j o i n t recommendation, of the Board of Governors and the M i n i s t r y of F i n a n c e . ^ i i . P r o v i s i o n for.Security:Market,Operation The C e n t r a l Bank Act does, not s p e c i f i c a l l y r e f e r to open market operation,., p o s s i b l y due to the. fact, that the country has no w e l l developed money market, However, the bank has the power to. buy and s e l l bonds and short term notes and has increased t h i s power to maintain the govern-ment c r e d i t . i i i . - .Reserve. Ratio F i x a t i o n . I t has, :already been noted that: the bank has the power to manipulate the reserve r a t i o of the; customer banks. So f a r t h i s power has, been exercised to the extent of i n c r e a s i n g the r a t i o from f i f t e e n per cent, to twenty per cent. i v . Exchange Rate.Control U n l i k e other C e n t r a l banks,, the C e n t r a l Bank of the Tu r k i s h Republic has been vested w i t h the power of r e g u l a t -ing the i n t e r n a l value of the Turkish, currency. This power and i t s , associated duty was taken from the antecedent F o r e i g n Exchange Con t r o l Board which had been e s t a b l i s h e d a year e a r l i e r . The. operation of t h i s c o n t r o l i s explained i n ^The.Central Bank, of the Turkish Republic A c t , Appendixes and M o d i f i c a t i o n s , Ankara 1955, Ankara Baslm ve C i l t E v i , S e c t i o n V, A r t i c l e 1+6. 113 some d e t a i l i n the second part of the chapter. 2.. .The, Centra 1 Bank , as,/a, ffunctioning I n s t i t u t i o n By v i r t u e of the powers, p r i v i l e g e s and r e s p o n s i b i -l i t i e s vested i n i t by the T u r k i s h parliament, the C e n t r a l Bank of the Tu r k i s h Republic became an. important f u n c t i o n a r y i n the T u r k i s h f i n a n c i a l community almost a t the moment of I t s establishment.. I t supplied the., c r e d i t s required to p r o j e c t the country's r e c o n s t r u c t i o n program-, and a f t e r World War I I i t s issue- f u n c t i o n was i n c r e a s i n g l y r e l i e d upon to 'supplement the vo l u n t a r y savings upon which the success of.the program depended. The n e c e s s i t y of .securing the l a w f u l cash money wit h which to make primary advances to: t h e i r borrowers., l i t e r a l l y made, a l l the commercial lend-ing i n s t i t u t i o n s beholden to the C e n t r a l Bank and the volume of redis.counted a g r i c u l t u r a l and commercial papers have therefore been almost as. l a r g e as i t s holding's of government bonds and short term notes. In the ex e r c i s e of i t s exchange c o n t r o l f u n c t i o n the bank b u i l t up a s u b s t a n t i a l horde of gold and while not e s t a b l i s h i n g gold c o n v e r t i b i l i t y at home, has had considerable success i n maintaining the value, of Tu r k i s h L i r a , abroad u n t i l 19i(-6. D e t a i l e d i n f o r m a t i o n on important aspects; of these operations are given .under the f o l l o w i n g r e l a t e d headings. a) Current Lending Operations Since commencing operation i n October, 1931-, the bank's current l e n d i n g operations have been very small In proportion,, and i n 19^6 the t o t a l has r i s e n to about two b i l l i o n and a h a l f 'Turkish L i r a . The. growth and make-up of the. bank 1 s .current discounts and advances are given i n the f o l l o w i n g t a b l e . TABLE XXVIII CURRENT DISCOUNTS AND ADVANCES OP THE CENTRAL BANK OP THE TURKISH REPUBLIC, BY SELECTED YEARS., 1933-1956* ( a l l amounts i n m i l l i o n s of T.L.) Notes Guarantee Commercial A g r i c u l t u r a l Years by the Treasury B i l l s . B i l l s T o t a l 1933 4 . 2 2 0 . 0 2 - - 4 . 2 1938 3 7 . 0 7 . 9 9 . 2 5 4 . 1 19^6 407.O 7 9 . 1 2 9 . 3 5.15.4 1953 1 , 4 2 4 . 4 3 4 6 - 3 2 0 3 . 2 1*973.9 1954 1 , 3 9 6 , 7 7.64-4 2 7 7 . 0 2 , 4 3 8 . 1 1955 1,-355.3 8 7 8 . 6 3 3 0 . 6 2 , , 5 6 4 . 5 1956** 1 , 3 4 1 - 0 794 ..0 3 2 8 . 2 2 , 4 6 3 . 2 '""Monthly. Report of the C e n t r a l Bank of the T u r k i s h Republic, No. 5 , May 1 9 5 6 , Ankara, pp. 16 - 1 1 ; and Prof. Kuyueak Hazim A t i f , op_.. c i t . , pp. 400-401-.402. ""The f i g u r e s given to the. end of A p r i l , , 1 9 5 6 . The- column, Notes Guaranteed by the Treasury, r e v e a l s the very considerable- support which the C e n t r a l Bank has giyen to the. current needs, of the- government a l l y sponsored i n s t i t u t i b ns.. The extent to which the bank has sought to encourage or discourage lending operations through manipulation of discount r a t e s i s revealed i n p a r t by the f o l l o w i n g summary of rates posted i n various dates since the bank's opening. TABLE- XXIX CLASSIFIED RATES POSTED BY THE CENTRAL BANK OF THE- TURKISH REPUBLIC ON VARIOUS DATES,. 1932-1955* Date of F i x a t i o n Rate on Commercial B i l l s — % Rate on Government . Se:c. — fo, Advance on G o l d — % Ordinary Loans % Jan. 1932 8 6 3A 12 Sept.1932 7 5 1/2 12 Mar.. 1933 5 1/2 k 1/2 k 1/2 12 J u l y 1938 k 5 1/2 3 8 1/2 Feb. 1 9 5 l 3 If 2 1/2 8 1/2 June 1955 k 1/2 5 1/2 3 1/2 7 """Monthly Report of the C e n t r a l Bank of the T u r k i s h Republic, No. 5, May 1 9 5 6 , Ankara, pp. 1 2 - 6 9 . """"There had been no f i x e d rate, f o r the advances on government .se c u r i t i e s u n t i l March 1933 . b) Government Borrowing. In the e x e r c i s e of i t s f u n c t i o n as a f i s c a l agent of the government.,, the.: bank appears to have followed a p o l i c y of minimizing i t s own commitment i n both long and short term government i s s u e s . As from the. date of i t s : establishment i t acquired T.L. l 5 8 , 7 4 8 - , 5 6 3 worth, of government bonds to support the take-over of the Ottoman government note i s s u e , w i t h which the T u r k i s h government paid o f f or i n e f f e c t refunded i t s outstanding t r e a s u r y issue i n the, same amount. During the f o l l o w i n g twenty years the T u r k i s h government r e t i r e d t h i s r e q u ired .bond i s s u e , but i n i t s p l a c e were, taken short-term government notes. The- extent of these operations i s as- f o l l o w s : TABLE .XXX CREDIT GRANTED TO. THE GOVERNMENT BY THE CENTRAL BANK OF THE TURKISH REPUBLIC. BY REPRESENTATIVE YEARS., 1933-1956* ( a l l amounts i n m i l l i o n of T. L, ) Long Term Short Term Advances on Short Years; Govt.Bond s Govt.Bonds Gold and Sec. Term T o t a l Advances to the Govt.. , 1933 3-7 1 5 6 . 4 3 . 6 - 163-7 193,8. 5 o . 5 191.-2 8 . 0 - 2 4 9 . 7 1946 50,0 *•* 1 6 8 . 6 2 1 7 . 2 4 3 5 - 8 1953 1 6 . 2 2 5 - 3 5 1 . 6 - 9 3 - 1 1954 1 2 9 . 8 2 9 . 7 1 2 3 . 9 .28.6 3 1 2 . 0 1955 4 4 . 2 2 9 , 6 16.3.8 3 0 5 . 1 5 4 2 . 7 1 9 5 6 ™ 13-5 2 9 - 4 1 3 6 . 8 3 9 1 . 9 5 7 1 . 6 "Monthly Report of the C e n t r a l Bank of the: T u r k i s h Republic, No. 5> May 195.6:, Ankara, pp. 7.-11; and Prof. Kuyucak Hazim A t i f , op., c i t . , pp. 4 0 0 - 4 0 1 - 4 0 2 . ""The f i g u r e s i n c l u d e a l s o government saving, bonds'. """""The f i g u r e s given by the end of A p r i l , . 1 9 5 6 , c ) Source of -Fund s . In t h i s course of operation the bank,, of course,,, secured most of i t s funds., w i t h which i t s investments and b i l l s ' p o r t f o l i o were b u i l t up,, from I t s p r i v i l e g e of i s s u e . I t also u t i l i z e d the reserve deposits of i t s customer banks and i t s c a p i t a l funds and reserves. The expansion which took place i n these accounts was as f o l l o w s : TABLE XXXI EXPANSION IN THE LIABILITY ACCOUNTS OF THE CENTRAL BANK OF THE TURKISH REPUBLIC, BY SELECTED YEARS 1933-1956-::-( a l l amounts i n m i l l i o n of T.L,) Years , Paid .in C a p i t a l and Reserves Deposits Outstanding Notes T o t a l 1933 10.5 - I46'. 8 157..3 1938 19.2 2 3 4 294.8 247 .4 194° 32 .9 115.7 930.7 1 ,079.3 1953 55.1 14-17 • 8 1,4±4.0 'l , . 8 8 6 . 9 1954 58.7 754-5 1 ,474.1 2 ,287.3 1955 59.9 814,6. 2 , 0 0 8 . 4 2,882 .9 1956 71-6 852.1 ' 1 ,995.4 2,919.1 """Monthly Report of the C e n t r a l Bank of the T u r k i s h R e p u b l i c , No. 5 , May 1956,, Ankara,, pp. 6 -7-8; and Prof. Kuyucak Hazim Atif',' op. c i t . , p. 3,97-"'"""The amount of reserves is. not a v a i l a b l e by the author. """"""""The f i g u r e s given at the end of A p r i l , 1956. d) F o r e i g n Exchange C o n t r o l Although Turkey had abandoned the gold c o n v e r t i b -i l i t y i n 1914 and discontinued making gold payments abroad, the country's balance of payment was such that when Kemal Ataturk's government .came to power i n 1923, the Turkish L i r a was s e l l i n g abroad at p r a c t i c a l l y i t s nominal value i n gold-,, which at the time was about 7,63 T u r k i s h L i r a to the pound S t e r l i n g . As the r e s u l t of the Increase i n imports, which followed, upon the implementation of the Treaty of Lausanne,, f o r e i g n funds became scarce and by 1929 the exchange ra t e had r i s e n to 10.09 to the. pound S t a r l i n g . ^ The s i t u a t i o n was f u r t h e r complicated by the r e p a r a t i o n pay-ments to which the. government, had been committed. In order to r e - e s t a b l i s h the e x t e r n a l value of the L i r a , and to r e s t r i c t the a v a i l a b i l i t y of f o r e i g n funds to e s s e n t i a l purposes, the government enacted a currency p r o t e c t i o n measure i n February,. 1930, under 'which, p r o v i s i o n was made f o r the establishment of an Exchange Co n t r o l Board c o n s i s t i n g of a consortium of banks under the d i r e c t i o n of the M i n i s t r y of Finance, and p l a c i n g the. country's' gold and 26 f o r e i g n exchange stocks under i t s custody. In October, 1931, these f u n c t i o n s were handed over to the C e n t r a l Bank of the Turkish-Republic by i t s - establishment, At the-time the • - - , 2 2 P r o f . Dr. Suvla R e f I I Sukru, T a t b i k l I k t i s a t - I k t i s a t S i y a s e t i , - V o l . 2, I s t a n b u l , 194&, PP- 181-182. 2 6 r b i d ,, p. 182. 119 gold stocks, of the bank were .6.1 metric tons, the equivalent of T.L. 8 . 5 4 m i l l i o n s . In the beginning the p r i c e s of f o r e i g n currencies were f i x e d by the C e n t r a l Bank a;s f o l l o w s : U.S. D o l l a r 2 . 1 1 T.L . j Pound S t e r l i n g 9 . 6 6 ; and Franc Swiss Q.i+ll T.L. Almost immediately a f t e r Great B r i t a i n abandoned the gold standard, France r e v a l o r i z e d i t s currency and a year l a t e r the U.S. D o l l a r was r e v a l o r i z e d . However,, the C e n t r a l Bank did not take advantage of the opportunity to comparably rev a l o r i z e , the Tu r k i s h L i r a , and, as a r e s u l t , the p r i c e of the U..S. d o l l a r was dropped to 1 . 3 1 ; pound .St e r l i n g to 5 . 2 2 ; and franc Swiss to 0 . 3 0 T.L.- 27 A f t e r 1929, by a p r o t e c t i v e t a r i f f and v i g i l a n c e of the exchange c o n t r o l department of the bank combined, the country*s stock of gold was' apprec i a b l y increased. During the Second World War this' i n f l o w almost reached a f l o o d p r o p o r t i o n , and by 1945 the. a c t u a l amount had r i s e n to 2 1 3 . 9 metric tons, the equivalent of 299.4°- m i l l i o n gold L i r a s at the p r e v a i l i n g p r i c e of 1 .40 T.L, per gram of pure gold. By the intense reaping of some immediate advantages i n f o r e i g n trade, and to reduce the government's o b l i g a t i o n s at the -Central- Bank, .Prime : M i n i s t e r -Recep P.eker p r e v a i l e d Prof. Dr. Sanus Burhan Z i g n i , .op'.. c i t . , p. 5 2 0 . upon the bank to reduce, the gold content of the T u r k i s h L i r a from .0 .71100 to 0 . 3 1 5 8 0 grams i n September*. 19M>. This was .somewhat l e s s than h a l f of i t s former value. In con-sequence t h i s , of course, had the. e f f e c t of i n c r e a s i n g the exchange r a t e on U.S. d o l l a r s from 1.31 to . 2 . 8 1 T.L.j on pound S t e r l i n g from 5 . 2 2 to 1 1 . 3 4 , a n <3 on Swiss f r a n c from p Q 0.30 to 0 . 6 7 5 . No appreciable change .occurred In the country's f o r e i g n trade and balance, of payment as a r e s u l t of t h i s r e v a l o r i z a t i o n , because the necessary precautions were not taken i n the meantime. However, the bank was .called upon, s h o r t l y t h e r e a f t e r , to support the new Democratic Government economic development p l a n , and i n the course of doing so g r e a t l y expanded i t s outstanding currency. This .substan-t i a l l y reduced the r a t e s of gold to currency and, i n con-sequence, the f o r e i g n value of the. T u r k i s h L i r a . The b l ack market p r i c e i n the United States fund i s nine L i r a to the d o l l a r . There f o l l o w s the composition i n the growth of the bank's gold stocks, i t s f o r e i g n exchange assets and l i a -b i l i t i e s . , a l so i t s outstanding currency. (See Table XXXII.) e) .Summary' When the p e r t i n e n t .data from a l l the t a b l e s are brought • together : i n a combined statement-,' -we obtain a 2°;Prof. Dr. Sanus Burhan Z i h n i , op_. c i t . , pp. 5 2 0 -5 2 1 . 121 composite, p i c t u r e of the extent and d i v e r s i t y of the bank's operation. TABLE- XXXII SOLD STOCKS, OUTSTANDING CURRENCY, FOREIGN EXCHANGE ASSETS. AND LIABILITIES OF THE CENTRAL BANK 0,-F THE TURKISH REPUBLIC BY YEARS 1933-1956 ( a l l values i n m i l l i o n of T.L.) -* Ye ar s Gold i n Gold In Metric Current Ton T.L. Fo r e i g n Exch. Assets F o r e i g n Exch. L i a b i l -i t i e s Outstanding Currency R a t i o of Gold to Currency by % .. 1933 17.6 .21+. 6 - - 11+6.8 16.7 1938 26 . 2 36 .9 5.7 22.7 .201+.-8 18.0 191+6 210.8 6.63.3 196.6 310.6 930.7 71.2 • 19.53 126 .8 1+01.6 196.6. 581.1 1,1+11+. 0 28.1+ 1954 126 .9 1+01.8 172.3 737.3 1,1+71+-1 27.2 1955 127.0 1+02.0 187.9 91+1+-5 2,008.1+ 20.0 195 6*--::-127.0 1+02.2 207.1 863.8 1,955.1+ • ^Monthly Report of the C e n t r a l Bank of the Turk i s h Republic, No. by May 1956, Ankara, pp. 6.-8-9; and Prof. Kuyucak Hazim A t i f , . op_. c i t . , pp. 397-398. -::-*-The f i g u r e s given at the end of A p r i l 1956. In a period of twenty-eight years the bank.' s assets and l i a b i l i t i e s have r i s e n from approximately .200 m i l l i o n T u r k i s h L i r a s to the r e l a t i v e l y enormous sum of l+,250 m i l l i o n . How much of t h i s has been a r e a l gain has been estimated i n the concluding chapter which f o l l o w s . 122 TABLE XXXIII THE PROGRESS OP THE LIABILITIES AMD ASSETS OP THE CENTRAL BA1K OP THE TURKISH REPUBLIC, BY YEARS 1933-195.6 APRIL. ( a l l amounts i n m i l l i o n of T.L,.) Items, 1933 193© 1946 1953 1954 1955 1956 L i a b i l i t i e s C a p i t a l 15 15 15 15 15 15 15 Reserves - 8 . 7 2 2 . 4 44.-6 4 8 . 2 4 4 . 9 5 6 . 6 Banknotes 1 4 6 . 8 2 0 4 . 8 9 3 0 . 7 l 4 l 4 - 0 1474-1 2003 .4 1955-4 Deposits - 2 3 - 4 l l 5 - 7 4 1 7 - 8 754-5 8 1 4 . 6 8 5 2 . 1 F o r e i g n Ex. and Gold -Creditors - 2 2 . 7 310-6 5 8 1 . 1 7 3 7 - 3 9 4 4 - 5 8 6 3 . 8 Others - 8 8 - 4 4 9 8 . 8 3 3 4 - 6 3 9 3 - 1 4 6 2 . 2 5 l l - l P r o f i t - 2 . 2 7-9 1 2 . 9 1 3 . 9 4 8 . 5 T o t a l . 2 2 2 . 0 * * 3 6 5 - 2 190.1-1 2 8 2 0 . 0 3 4 3 6 . 1 4 3 3 8 . 1 4 2 5 4 . 0 123 TABLE XXXIII .(Continued) Items 1933 1938. 1946. 1953 .1954 1955 1956 Assets C o l d 2 4 . 6 3 6 . 9 .6.63-3 4 0 1 . 6 4 0 1 . 8 4 0 2 . 2 4 0 2 . 2 F o r e i g n Debtors - 5-7 1 9 6 . 6 1 9 6 . 6 1 7 2 . 3 1 8 7 . 9 2 0 7 - 1 B i l l s Portfolio""""""""" 7-9 8 7 - 5 5 5 6 - 9 1 9 9 0 . 1 2 5 6 7 - 9 . 2 6 0 8 . 8 2 4 7 6 . 7 S e c u r i t i e s ..Port. 1 5 6 . 4 191-2 1 6 8 . 6 .25.3 2 9 . 7 2 9 . 6 2 9 . 4 Advances"""""""" 3 .6 , .8,0 2 1 7 . 2 5 l . 6 1 5 2 . 5 4 6 8 , 9 ' 5 2 8 - 7 Unpaid C a p i t a l 4 . 5 4.-5 4 - 5 4 . 5 4-S Others - 2 9 - 4 91-7 145-6 103-9 6 3 9 - 2 - 6 0 8 , 5 T o t a l 222,. 0*;«- 3 6 5 - 2 1 9 0 0 . 1 . 2820 . : 0 3 4 3 6 , 1 4 3 3 8 . 1 4 2 5 4 - 0 "Monthly Report of the. C e n t r a l Bank of: the T u r k i s h Republic, No. 5, May.1956, Ankara, pp. 6 - 7 - 8 - 9 ; and Prof. Kuyueak. .Hazim A t i f , op, c i t . , pp. 4 0 0 ~ 4 0 1 - 4 0 2 . -"--:;-Tot.al i s estimated by the author. -xx-x-Bills P o r f o l i o . includes Treasury Bonds, Bonds guar-anteed by the Treasury, and Commercial and A g r i c u l t u r a l B i l l s -;c-*-iK;-Advanc.e account includes advances on gold and secu-r i t i e s , and short term c r e d i t s granted to the Treasury. CHAPTER VII SUMMARY AM) CONCLUDING- OBSERVATION The commercial and i n d u s t r i a l r e v o l u t i o n which has taken p l a c e i n Turkey since the i n s t i t u t i o n of Kemal Ataturk*s W e s t e r n i z a t i o n program i n 1923 is, nowhere else b e t t e r exemplified than i n the changes which have taken place i n the country's f i n a n c i a l s t r u c t u r e . For many cen t u r i e s preceding the 19,23 r e v o l t , the country's economy was p r i m a r i l y a g r i c u l t u r a l and had b a r e l y progressed beyond the f e u d a l system of the f i f t e e n century i n Western Europe. I t s leaders were preoccupied e i t h e r w i t h t h e i r own despotic ambitions or wi t h p r o t e c t i n g the expanding Ottoman Empire from the ambitions of the neighbouring r u l e r s . The country's r e l a t i v e l y modest monetary needs were met, i n p a r t , from coins brought i n by the f o r e i g n t r a d e r s and by the Empire mint. In the l a t t e r part of the. nineteenth century., the country had i t s f i r s t experience w i t h f i a t Treasury issues and reverted to t h i s f i s c a l expedient again during World War I,, but at no time i n i t s h i s t o r y d i d i t maintain a gov-ernment note i s s u e as an ordinary p a r t of i t s money media.' In these e a r l y times of the Ottoman Empire, the country's modest banking needs were mostly supplied by money lenders and exchange dealers and merchants'. N.ot u n t i l the middle of the nineteenth century were, formal banking houses e s t a b l i s h e d , mostly by f o r e i g n e r s and r a r e l y by Tur k i s h N a t i o n a l s . 124 The most important of these e a r l y hanks was e s t -a b lished at the time of the Ottoman Empire. I t was the B r i t i s h owned and .chartered Bank of Ottoman - Qsmanli Bankasi, and was e s t a b l i s h e d as a crown concession to .assist i n the f i n a n c i n g of the .government f i s c a l needs'. •  In r e t u r n f o r loans and c r e d i t s granted by t h i s remarkable, i n s t u t i o n was' given the. e x c l u s i v e p r i v i l e g e of bank-note issue, and, f o r a time, during the subsequent f i n a n c i a l , . c r i s i s of 1873 , became, to a l l i n t e n t s and purposes the. master of the country's purse. I t exercised c o n t r o l of the o v e r a l l receipt's and expenditure of p u b l i c money and administered the a f f a i r s of the revenue, producing crown monopolies. The bank appears to have moved into. the. background during- World War I when Turkey was a l l i e d w i t h the C e n t r a l Power, but had not l e g a l l y surrendered I t s very extensive p r i v i l e g e s u n t i l the establishment, of the C e n t r a l Bank of the T u r k i s h Republic i n 1931 and i t s ' note issue, p r i v i l e g e , was not withdrawn u n t i l 1 9 4 ° . Although a number of p u r e l y domestic banks were es t a b l i s h e d during the antecedent p e r i o d , the only important i n s t i t u t i o n s ' which survived were the predecessors of the A g r i c u l t u r a l . Bank of the Tu r k i s h Republic - Turkiye Cumhuriyeti Z i r a a t Bankasi - which was e s t a b l i s h e d i n 1 8 8 8 ; the S e c u r i t y Bank of I s t a n b u l - I s t a n b u l Emniyet S a n d i g i -which was founded i n 1 8 8 6 ; and the Commercial Bank of Turkey -Turk'. T i c a r e t ' Bankasi - which was founded i n 1914, The former two e v e n t u a l l y were brought under the p r o t e c t i v e wings of the Republican government and would now he classed as 126 q u a s i - p u b l i c i n s t i t u t i o n s o f T u r k e y . The l a t t e r became one of the l e a d i n g p r i v a t e , c o m m e r c i a l i n s t i t u t i o n s i n T u r k e y and i s so today. . The n o n - s u r v i v o r s were e i t h e r m o d e r a t e l y c a p i t a l i z e d or committed too h e a v i l y i n the f i n a n c i n g , to, the Ottoman government, w h i c h was c o n s i d e r e d the b e s t s o u r c e of p r o f i t m a k i n g . The a s s u m p t i o n o f power by Kemal A t a t u r k i n 1923 marks the- b e g i n n i n g of modern T u r k e y and t h e r e c o n s t r u c t i o n p r o g r a m w h i c h , though s t i l l i n c o m p l e t e , has a l r e a d y p r o d u c e d p r o f o u n d changes i n , t h e s t r u c t u r e o f the T u r k i s h economy, p a r t i c u l a r l y i n a g r i c u l t u r a l methods and i n i n d u s t r i a l u n d e r -t a k i n g s . I n the:- sphere o f the money and b a n k i n g r e c o n s t r u c -t i o n t a s k , i n the f o r m of p r o m o t i n g q u a s i - p u b l i e f i n a n c i a l i n s t i t u t i o n s , t o a s s i s t i n the. f i n a n c i n g of new i n d u s t r i a l u n d e r t a k i n g s , the f o u n d i n g of the C e n t r a l Bank o f the, T u r k i s h R e p u b l i c and the enactment of a g e n e r a l b a n k i n g law d e s i g n e d t o promote, the development of p u r e l y p r i v a t e b a n k i n g v e n t u r e s , p a r t i c u l a r l y t h o s e o f T u r k i s h N a t i o n a l s , c o i n c i d e s w i t h t h i s p e r i o d . Among the q u a s i - p u b l i c banks e s t a b l i s h e d d u r i n g the l a t t e r p e r i o d were the. I n d u s t r i a l Bank - Sumerbank, The. P r o v i n c e s ' - Bank - I l l e r B a n k a s i , T h e Maning Bank - E t i b a n k , and the Maritime.. Bank - B e n i z o i l l k B a n k a s i . These banks were c h a r t e r e d under s p e c i a l Acts ' of the T u r k i s h P a r l i a m e n t , t h e i r c a p i t a l s were f o r the most p a r t s u b s c r i b e d by the T u r k i s h government o r i t s agencies ' and most of them have. the p r i v i l e g e of i s s u i n g debentures under the guarantee of the Treasury. T h e i r growth and importance i s demonstrated by the f a c t that they now operate some 6l+l\. branches, have, c a p i t a l funds and reserves o f T.L. l,l\.3k->% m i l l i o n , deposits and other o b l i g a t i o n s T.L. 3 , 9 5 8 . 3 m i l l i o n and loans and investments of T.L. lj . , 6 9 9 - 5 m i l l i o n s . At the beginning of the r e c o n s t r u c t i o n p e r i o d , i n s t i t u t i o n s of t h i s c l a s s had approximately one hundred branches* c a p i t a l and reserves of approximately T.L. 16 m i l l i o n deposits arid other o b l i g a t i o n s of about T.L. 5 m i l l i o n , and loans and investments of T.L. 1 0 . 5 m i l l i o n s . Meanwhile a p a r a l l e l and e q u a l l y s i g n i f i c a n t , expan-si o n has taken place i n the: r e s p e c t i v e spheres occupied by the f o r e i g n and d o m e s t i c a l l y owned pu r e l y p r i v a t e banking I n s t i t u t i o n s . The Bank Act, proclaimed i n 1936, brought both classes of i n s t i t u t i o n s under the s u r v e i l l a n c e of the M i n i s t e r of Finance and provided l e g a l safeguards f o r t h e i r customers i n the- form of nominal c a p i t a l - deposit r a t i o s . The C e n t r a l Bank Act had already made p r o v i s i o n f o r reserve deposits, and f i x a t i o n of discount and i n t e r e s t r a t e s . Between 1921+ arid 1956 the number of f o r e i g n banks Increased from two to seven; t h e i r branches from 32 to: 5 0 . At the beginning of the period t h e i r c a p i t a l and reserves t o t a l l e d about T.L. 10 m i l l i o n , t h e i r deposits about T.L. 5 m i l l i o n , and t h e i r loans and investments T.L, 12 m i l l i o n . Today these f i g u r e s are T.L. 2 7 . 7 million,/T.L,. 288 .6 m i l l i o n . , T.L. 2 6 5 - 5 m i l l i o n s r e s p e c t i v e l y . During the same period 128 the: number of d o m e s t i c a l l y owned p r i v a t e hanks I n c r e a s e d f r o m 18 to 37, and t h e i r b r a n c h e s f r o m about 230 t o 5l3« At the b e g i n n i n g o f t h e p e r i o d t h e i r c a p i t a l and r e s e r v e s t o t a l l e d T . L - 6 m i l l i o n , , t h e i r d e p o s i t s T . L . 12.5 m i l l i o n , and t h e i r loans' and i n v e s t m e n t s T . L . 17.6 m i l l i o n . Today t h e s e t o t a l s a r e T . L . 2 2 3 . 0 , T . L . 1 ,672.9 , T . L . 1 ,660.6 m i l l i o n r e s p e c t i v e l y . By v i r t u e of the dependence of the s u b o r d i n a t e b a n k i n g i n s t i t u t i o n s on a v a i l a b i l i t y of l a w f u l money, c h e c k -i n g a c c o u n t s a r e n o t g e n e r a l l y u s e d . The e x c l u s i v e p r i v i -lege of Issue was g r a n t e d to the C e n t r a l Bank of the-T u r k i s h R e p u b l i c , , thus making t h i s i n s t i t u t i o n the c e n t r e of the T u r k i s h b a n k i n g s t r u c t u r e a l m o s t f r o m t h e b e g i n n i n g of i t s e s t a b l i s h m e n t . S i n c e i t s f o u n d i n g i n 1931,- the b a n k ' s d i s c o u n t s , and advances have; r i s e n , t o T . L . 2, [1.63 . 2 , i t s . i n v e s t m e n t s to T . L . 571-6, and i t s o u t s t a n d i n g n o t e i s s u e and d e p o s i t s t o T . L , 2,.807.5 m i l l i o n r e s p e c t i v e l y . F o r c o n v e n i e n c e , the f o r e g o i n g c o m p a r i s o n s have b e e n b r o u g h t t o g e t h e r i n the c o m p o s i t e t a b l e - shown on page 129. A l t h o u g h the growth and e x p a n s i o n of t h e T u r k i s h b a n k i n g s y s t e m has been t r u l y phenomenal-> as' can be seen f r o m the c o m p a r i s o n i n T a b l e XXXIV, t h i s , of course.', made the c u r r e n t v a l u e of t h e T u r k i s h L i r a m i s l e a d i n g . The use of the C e n t r a l Bank as a s o u r c e o f l o n g t e r m as w e l l as TABLE XXXIV COMPARATIVE GROWTH OP TURKISH BANKS BETWEEN 1924-1956 ( a l l amounts i n m i l l i o n of T.L.) Class of Bank •  192k • 1956. Q,uasi-Public: No. of Banks 2 11 No. of Branches 100 61+1+ Paid i n C a p i t a l and Reserves 16 1,1+34.5 Deposits and Other O b l i g a t i o n s 5 3 ,958.3 Loans and Investments 10.5 l+,.699.5 Domestically Owned P r i v a t e Banks: No. of Banks 18 37 No, of Branches 230 513 C a p i t a l and Reserves 6 .223.0 Deposits. 12.5 1 ,672.9 Loans and Investments 17.6 1 ,660.6 F o r e i g n Owned P r i v a t e Banks: No. of Banks 2 7 No. of Branches 32 50 C a p i t a l and Reserves 10 27.7 Deposits 5 288.6 Loans and Investments 12 265.5 T o t a l s : Banks 22 55 Branches 362 1,161+ Paid i n C a p i t a l and Reserves 32 1 ,685.2 Deposits and Other O b l i g a t i o n s 22.5 5,919-8 Loans, and Investments 1+0.1 6,625-6 1932 1956 C e n t r a l Bank of the: T u r k i s h Republic : No. of Branches ' 2 8 C a p i t a l and Reserves 10.5 62 .5 Reserve Deposits 852.1 Notes Outstanding 11+8.6 1,.955.1+ Dlacbunt and Advances .27.0 2,1+63.2 Investments •- I 6 3 . 8 571.. 6. short term c r e d i t s , p r a c t i c a l l y since 191+1, was n a t u r a l l y accompanied by a sharp increase i n the p r i c e l e v e l and e q u a l l y a d e c l i n e i n the purchasing power of T u r k i s h currency. 130 Since the outbreak of the Second World War, the Index of wholesale p r i c e s has, increased by more: than s i x f o l d and i t appears u n l i k e l y that the- present government w i l l he able to continue' to meet i t s current commitments i n both investment and defence- without adding more f u e l to the i n f l a t i o n a r y process. At the beginning of the- r e c o n s t r u c t i o n p e r i o d , the government of Kemal At a t u r k followed a tough but r e a l i s t i c : f i s c a l p o l i c y and not only succeeded i n financing' the f i r s t and second f i v e year plans:,, .but also. paid, o f f the World War I indemnities l e v i e d by the v i c t o r i o u s a l l i e s . However, at the outbreak of World War I I , the government sought to p r o t e c t i t s n e u t r a l i t y by b u i l d i n g up and maintaining a large, m i l i t a r y establishment,, but d i d not meet a l l o f i t s Costs, through an orthodox f i s c a l device. Since the. war the mounting t e n s i o n between East and West has d i c t a t e d i n c r e a s i n g r a t h e r than d i m i n i s h i n g the country's defenses -expenditures,, and more than h a l f of the n a t i o n a l budget was and continues to be devoted to t h i s purpose-. The s t r a i n on the government's revenue sources was te m p o r a r i l y a l l a y e d by the r e v a l o r i z a t i o n of the- T u r k i s h L i r a i n 191+6, but the continued unbalance i n the N a t i o n a l Budget was covered by heavy borrowing at the C e n t r a l Bank. This drove banknote issues c o n s i s t e n t l y upward and f u r t h e r cheapened the Turkish. L i r a , i n domestic t r a n s a c t i o n s . I t a l s o severely complicated the problem of maintaining the e x t e r n a l value- of the- L i r a and gave- rise - to b l a c k market dealings' abroad . The unbalance- i n the budget was. f u r t h e r complicated .by the vigorous resumption of the r e c o n s t r u c t i o n program by the Mender es. government, even though, the resump-t i o n was and i s i n part financed by the s u b s t a n t i a l grants made under the p r o v i s i o n s of the- European Recovery Program and loans from the World Bank. The movement i n the- wholesale p r i c e index during and since- World War I I has. been as f o l l o w s : 1 Year's . .Index Years Index 1938 10.0 1948 466 ,1940 126 .6 1952 486 1943 5 9 0 . 1 1954 549 1946 4 3 5 . 2 1956 March 6-79 E v e n t u a l l y the. government i n power r e a l i z e d the seriousness of the i n f l a t i o n on the- country's; economy, caused by the followed economic p o l i c y . On January 2 9 , 1956, the government announced the steps that were- going to be taken i n order to avoid t h i s economic d i s a s t e r . These steps were the l i m i t a t i o n of the government investments to those sectors which would have a rapid and s a l u t a r y e f f e c t on-Turkey's balance of payments and i t s budget; State's iMonthly Report of the C e n t r a l Bank of the T u r k i s h Republic,. No-. 5,- May 1956,- Ankara,- p. 6 6 . economic ventures would have to meet t h e i r expenses from t h e i r income sources not from the C e n t r a l Bank f i n a n c i n g . In a d d i t i o n to. these,, the- Law f o r the P r o t e c t i o n o f the-N a t i o n a l Economy was announced* e s t a b l i s h i n g r i g i d markups f o r producers,, wholesalers' and r e t a i l e r s . Although these precautions have not yet stopped the i n f l a t i o n a r y t i d e * i t has. somewhat improved i n f o r e i g n exchange i n recent months. The present economic s i t u a t i o n of Turkey now i s the c r i t i c a l p e riod of a country which has engaged I t s e l f i n an economic development. I t i s hoped that e v e n t u a l l y the current investment i n modernization and r e c o n s t r u c t i o n w i l l ' p a y r e a l dividends i n increased output. I f i t does* i t w i l l r e l i e v e the-government of the burden of continued c a p i t a l outlays and, at the same time-, increase the government's ordinary revenue resources. However-, one would be unduly o p t i m i s t i c to assume that a people s t i l l l i v i n g w ith one f o o t i n the. slowly unchanging East,, and the other i n the- progress-minded West, could accomplish i n one generation, an I n d u s t r i a l and commercial r e v o l u t i o n which elsewhere has taken f i v e generations. 133 BIBLIOGRAPHY PRIMARY SOURCES 1. Books .and P e r i o d i c a l s Prof- • Dr,...Suvla Ref i i Sukru,. T a t b i k i . I k t i s a t I k t l s a t S i y a s e t i . F i r s t e d i t i o n . 2 v o l s . i n 2 . P u b l i c a t i o n of the U n i v e r s i t y of I s t a n b u l No. 372,. F a c u l t y of Economics No. J4.2.. I s t a n b u l : I s m a i l Akgun Matbaasi,. 1948. ' Prof. Dr. Sanus Burhan Z i h n i , Para Economisi. F i r s t E d i t i o n . .2 v o l s , i n both. I s t a n b u l : I s t a n b u l M a t b a a e i l i k T.A.O., 1956. P r o f . Kuyucak Hazim A t i f , Para ve. Banka, Second' E d i t i o n . .2 v o l s , i n 2 . P u b l i c a t i o n of the U n i v e r s i t y of I s t a n b u l No. 3 4 4 , F a c u l t y of Economics" No. 37 • I s t a n b u l : I s m a i l Akgun Matbaasi,. 1 9 4 8 . Report I n t e r n a t i o n a l Reconstruction and Development Bank f o r 1 9 4 8 . Monthly Report of the C e n t r a l Bank of the T u r k i s h R e p u b l i c , ~~ No'.. >, May 1956,. Ankara: Maarif Baslmeyi, I s t a n b u l . Annual Report of the C e n t r a l Bank of the Turkish Republic for' 1955- Ankara.: Ankara Basim ve C i l t E v i , 1 9 5 6 . The Act of the C e n t r a l Bank of the' T u r k i s h Republic., w i t h Appendixes and Manipulations u n t i l December 3 1 , 1955-Ankara; Ankara ,Basim ye C i l t e v i , 1 9 5 5 . Banking Act of Turkey, No. 2 9 9 9 , June- 1, 1 9 3 6 . Decent Dr. Barda Suleyman., Economics ..and F i n a n c e , I s t a n b u l , 1954-

Cite

Citation Scheme:

        

Citations by CSL (citeproc-js)

Usage Statistics

Share

Embed

Customize your widget with the following options, then copy and paste the code below into the HTML of your page to embed this item in your website.
                        
                            <div id="ubcOpenCollectionsWidgetDisplay">
                            <script id="ubcOpenCollectionsWidget"
                            src="{[{embed.src}]}"
                            data-item="{[{embed.item}]}"
                            data-collection="{[{embed.collection}]}"
                            data-metadata="{[{embed.showMetadata}]}"
                            data-width="{[{embed.width}]}"
                            async >
                            </script>
                            </div>
                        
                    
IIIF logo Our image viewer uses the IIIF 2.0 standard. To load this item in other compatible viewers, use this url:
http://iiif.library.ubc.ca/presentation/dsp.831.1-0106091/manifest

Comment

Related Items