Deputy Prime Minister Ali Babacan has said the public Ziraat bank is considering purchasing Turkey's 10th-largest private bank, a move that many have interpreted as the authorities' latest effort to crush the lender as a form of vengeance against the Hizmet movement, with which Bank Asya is affiliated. A number of pro-government media outlets circulated stories of alleged troubles for Bank Asya on Thursday. Bank Asya has dismissed the remarks as "false" and said no such talks have taken place.
Pressure on the bank intensified on Thursday as an agreement between the Finance Ministry and Bank Asya allowing the bank to collect taxes was canceled, the revenue administration said on its website. The bank was notified that the agreement will be annulled as of Sept. 8, it said. The Social Security Institution (SGK) also said on Thursday it has ended its services accord with Bank Asya. The bank said in a written note that it will take legal action against these decisions, "about which it was not informed."
Three state-run Turkish banks, including Ziraat, have been working on setting up Islamic banks over the past year. Prime Minister Recep Tayyip Erdoğan's statements earlier this week revealed long-discussed government plans to force Bank Asya's management to hand the bank over to the public. Erdoğan blames one of Turkey's most influential faith-based groups, the Hizmet movement, of trying to undermine his power; however, he has failed to provide any sound evidence since a corruption probe that implicated him, his family, Cabinet members and close business associates on Dec. 17.
Earlier this year, a number of state companies and institutions withdrew massive amounts of money from Bank Asya in order to push it into insolvency by choking its liquidity conditions. Tens of thousands of new customers opened bank accounts with Bank Asya and deposited large sums into their accounts following this maneuver, to help avoid possible bankruptcy due to low capital adequacy ratios. Bank Asya General Manager Ahmet Beyaz said in January that the lender had weathered the mass deposit withdrawals and was not at risk.
In a statement to Borsa İstanbul (BİST) late on Wednesday, Bank Asya denied allegations that it was in talks with Ziraat regarding a possible sale. Bank Asya said in June that it had mandated Goldman Sachs as its financial advisor for a strategic partnership, without giving further details. Noting that Qatar Islamic Bank (QIB) and Bank Asya are still in talks regarding a strategic partnership, Bank Asya said it has an exclusivity agreement with the QIB. “This means [Bank] Asya cannot hold talks with another financial institution until September, when the agreement expires,” it said.
Possible backfire due to int'l reactions
A source involved in the financial market who asked to remain anonymous said the government has “apparently launched a new campaign, this time trying to purchase the bank after numerous failed attempts to sink the bank earlier this year.” The source said Bank Asya's inspection records are clear and that there are no legal grounds that would enable the government to force the bank to sink. “The government's attempt to take over Bank Asya with no reason may backfire, as the bank will then take the issue to international courts such as the European Court of Human Rights [ECtHR]. … In a separate case last year, the ECtHR ruled that the Turkish government pay Demirbank, which was forced to sink in 2000, a total of $1 billion.”
An article in the Financial Times on Thursday referred to the government's attempt to take over Bank Asya as a ploy to “talk down an asset and then try and nab it for yourself.” The FT article noted that such moves undermine foreign investor confidence in Turkish markets, while “İstanbul is still hoping to become an international financial center.”
Following Babacan's comments on Wednesday, Bank Asya shares traded on BİST gained, leading to an increase in the bank's market value of about TL 100 million ($47 million). On Thursday, however, the bank's shares lost more than 5 percent after Yiğit Bulut, chief adviser to Erdoğan, contradicted Babacan.
Observers said that by openly targeting a private bank, government officials -- including Erdoğan -- are committing a crime within the scope of relevant articles in the Banking Law regarding the protection of the credibility of financial institutions. “Babacan is a successful and pragmatic policy-maker, who unfortunately looks set to exit the Turkish political scene in the next election. Bulut has yet to prove himself in any meaningful way on the policy front. …a hand-over from Babacan to Bulut would raise significant question marks in investors' minds,” Timothy Ash from Standard Bank said in an e-mailed note on Thursday.
On Thursday afternoon, Bank Asya shares on BİST were suspended, a routine measure to avoid massive losses for shareholders.
Published on Cihan, 08 August 2014, Thursday
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