Summer 1996 (4.2)
Back To Baku!
The British Bank of the Middle East
by Alan Wilkinson
Introduction - The Early Years
When the British Bank of the Middle East (BBME) opens its branch in Baku in August this year, it will be returning to Azerbaijan after an absence of almost 80 years.
The BBME began as the Imperial Bank of Persia, established in 1889 with a Royal charter from Queen Victoria, and a Concession from the Government of Persia, making it the state bank of Persia. The head office was in London, but all the branches were located, in those early years, in the various towns and cities of Persia, with the Chief Office based in Teheran.
By 1913, there were branches in 17 Persian cities, from Bushahr in the southwest, to Tabriz in the northwest, and Mashad in the northeast. In 1918, during a period of rapidly fluctuating political and military fortunes in the region, Baku was occupied by a contingent of British troops. At the request of the British Government of the time, an office of the Imperial Bank of Persia was established in Baku in order that salaries could be paid to the troops, and payments made for their provisions, food and other necessities. In the face of so much regional turmoil, the Imperial Bank's presence in Baku was only intended to be temporary; and so when the British troops packed their tents and left the city in early 1919, the bank closed.
But Baku had also played another role in the lives of those early pioneering managers and staff of the Imperial Bank of Persia all those years ago. No matter what route they took between London and Teheran, they always stopped in Baku. The common factor in all the routes whether by train or steamer, whether through Istanbul, Batumi or Odessa, the travel weary bankers would pause for a few days relaxation in Baku before continuing their journeys.
Baku - Early Trade and Finance
The official history of the BBME which is entitled "Banking and Empire in Iran" by Dr. Geoffrey Jones carries several other interesting mentions of Baku. For instance, in 1900, when Russia extended a major 75 year loan to the Persian government, the Imperial Bank moved swiftly to sell as much exchange as possible in Persia-thus strengthening the banks cash position-while buying all the paper it could in Baku. In another mention, Baku was described as the major port for exports of rice and silk from the Gilan region of northern Persia.
Finance for these exports was provided by the Imperial Bank's branch as Rasht, which duly prospered. A depression in Baku, however, in the early 1900s severely damaged the export of rice to Russia, while disease and a devastating hail storm in 1904 ruined the silk crop prospects for a period of years. The fortunes of the Rasht Branch were never the same again. In 1935 the name of the Imperial Bank of Persia was changed to the Imperial Bank of Iran. In 1949 it became the Bank of Iran and the Middle East. The present name was adopted in 1952.
In 1959, the BBME merged with the Hong Kong and Shanghai Banking Corporation, the first significant move by the latter to build, by merger and acquisition, a global banking and financial services group which is now among the largest in the world. Today, its total assets exceed $352 billion.
So what will this global banking giant bring to Azerbaijan in its long delayed return? While the present period cannot be regarded as tumultuous as when the BBME was last in Baku, the Republic is, nevertheless, in the middle of a period of significant change as it treads a far from easy path from a command to a free market economy.
New Banking Services in Baku
Into this changing scene, the BBME will aim to introduce services which will facilitate the changes in Personal, Corporate and Investment banking. Customers will have access to Automatic Teller Machines, automated telephone banking services offered and access to 250,000 cash dispensers in 88 countries through the Group Global Access ATM network of HSBC (Hong Kong Shanghai Banking Corporation).
Emphasis will be placed on the provision of premium customer service. Corporate Banking Services will include the full range of trade-related products and, with over 3,000 branches in 70 countries, customers using BBME in Azerbaijan will benefit significantly; their Documentary Credits for example will be accepted worldwide with no need for expensive confirmation changes to be levied. Speed of operation, obviating the use of Correspondents, will also be a distinct advantage. Foreign exchange and money market services are also core products in the Group In Investment Banking, the companies already mentioned give BBME the ability to offer services related to major export and corporate finance, privatization, equity brokerage and asset management.
Azerbaijan, a country of approximately 7 million inhabitants, currently has over 150 different banks which is an excessive amount. The banking reforms already under way in the country will bring about a considerable reduction which can only be good for the development of an improved banking system. The BBME looks forward to an exciting future in Azerbaijan and as the country moves to a free market economy, the bank believes it has much to offer, given its long history in the region, its global reach, its proven and tested computerized systems and its keenness to play an important role in country's re-development.
Alan Wilkinson is the Executive Director of the Baku Branch of British Bank of the Middle East.
From Azerbaijan International (4.2) Summer 1996
© Azerbaijan International 1996. All Rights Reserved.