Historical origins of foreign capital in the Turkish banking system

The Turkish banking system has been shaped by the influence of foreign capital from the Ottoman Empire to the present day. This influence began with the operation of foreign banks in the country to meet the financial needs of the Ottoman state. In particular, the increasing debt in the 19th century, the establishment of the Ottoman Public Debt Administration (Düyûn-ı Umumiye), and the rise of foreign-capitalized banks such as the Ottoman Bank laid the foundations for foreign influence in the banking sector. This topic is significant for understanding Turkey's journey toward economic independence and evaluating the role of foreign capital in the banking sector. This study employs historical document analysis and literature review methods to examine the historical roots of foreign capital in the Turkish banking system. The developments in banking during the Ottoman period and the early years of the Republic are analyzed using economic reports, official documents, and academic publications. Additionally, data on the structure of the banking system have been evaluated to understand the impacts of foreign capital on the sector. Research has shown that during the Ottoman period, foreign-capital banks played a major role in the economy due to the lack of domestic capital. The Ottoman Bank, established in 1856, became a significant instrument of financial control for the state and enhanced the economic influence of foreign nations. During the Republican era, efforts were made to restructure the banking sector through nationalization policies. However, with the liberalization policies initiated in the 1980s, foreign capital re-entered the Turkish banking sector. Today, the presence of foreign banks in the Turkish banking system is seen as beneficial for capital inflow and technology transfer, yet it also poses risks such as dependency in times of economic crises and challenges to economic sovereignty. The historical roots of foreign capital in the Turkish banking system originated from the financial needs of the Ottoman Empire and have persisted to this day. While foreign capital has the potential to strengthen the local banking sector, it carries the risk of creating dependency. The historical process underscores the importance of local capital and national policies in building an independent economic structure. Turkey must adopt a more strategic approach to balance the effects of foreign capital in the banking sector and safeguard its economic independence. Keywords: Banking, Foreign Capital, Turkish Banking System and Structure