The executive chairman of Turkey's largest Islamic lender, Ahmet Beyaz -- who has been removed from his position after a banking watchdog decided to take over the management of the bank -- said on Friday that the current position of Bank Asya's board is temporary and that shareholders would take legal action against the decision since it has no legal ground according to the relevant article of the banking law.
Delivering a speech at an event titled “Covering Turkey” held by the Journalists and Writers Foundation (GYV), Beyaz underlined that the decision made by the Banking Regulation and Supervision Agency (BDDK) was simply to take over the management of a majority of the shares, rather than a seizure. However, even this takeover was not legal, according to the clause through which the BDDK had decided to hand over the management of the lender to the Savings Deposit Insurance Fund (TMSF) since the article stipulates a different response in such a situation, Beyaz noted. Shareholders can file individual suits against the move, he added.
Claiming that the founding partners of the bank had failed to submit certain documents to the agency within a given period, the BDDK ruled that management control of 63 percent of the privileged shares of Bank Asya be transferred to the TMSF.
The CEO of the lender stressed that 60 percent of the bank's shares are B-type while the remainder are A-type -- dubbed privileged shares -- whose holders have exclusive rights to nominate members to the board for votes in annual executive meetings. Beyaz said that early in December, the watchdog requested around 20 different documents from 185 A-type shareholders including criminal records, audited financial records, tax records for five years, property records and accounts in other banks for both personal and corporate entities. All these documents, however, were to be delivered to the BDDK within one month. Underlying that a single month was not enough to collect all these documents, Beyaz said the bank had requested an extension to the deadline on behalf of the shareholders on several occasions but the watchdog refused all applications and raided the bank at a time when only 37 percent of shareholders had prepared the requested documents. Beyaz highlighted that the percentage of the shareholders who have submitted their documents to the watchdog has increased to 58 percent as of Friday.
On Tuesday the BDDK justified the takeover on the grounds that a failure to deliver the documents revealed a lack of transparency in the organizational and partnership structure of Bank Asya. The agency has appointed an interim board of directors to the bank.
Responding to allegations that the bank was financially damaged and that it was involved in financial irregularities, the chairman said the regulators can check whatever they want in order to unearth any wrongdoing. However, he maintained, the alleged legal grounds for a takeover was simply the failure to submit the documents rather than a poor balance sheet or claims of fraud. Asked about the bank's financial performance, Beyaz said that the currency adequacy ratio of Bank Asya -- the key indicator of the financial wellbeing of banks -- stood at 18 percent as of the third quarter of last year, a level beyond the sector average in Turkey of 15 percent. While the lender had recorded losses in profit and a rise in non-performing loans recently, Beyaz said this does not mean that Bank Asya had sunk. Highlighting that banks do not always make a profit, Beyaz added that the losses of Bank Asya were rooted in a smear campaign targeting the bank led by the government for over a year, causing the balance sheet to weaken last year after 18 consecutive profitable years since it was first established in 1996. He said the bank has lost 50 percent of its profits and has been forced to dismiss thousands of employees and close several branches across the country since last year. Beyaz also underlined that Tuesday's takeover was the first and only intervention in the bank's 18-year history.
When asked about his opinion concerning whether the decision was political, Beyaz said that he is a professional banker and has no comment on the question; however, he described the intervention as unusual and illegal and said he is confident that he will be returned to the board.
Friday's GYV event was attended by various foreign media outlets. Answering a question from the press, Beyaz said he does not know of anybody related to Islamic cleric Fethullah Gülen's family owning shares in Bank Asya. He also said a capital increase suggested by his management was still being evaluated by regulators.
Beyaz reiterated at the end of the speech that the takeover was a temporary measure and that shareholders will regain their rights; however, he also said that the intervention will tarnish confidence in the Turkish economy and the rule of law will be called into question by foreign investors.
In the meantime, barely a day passes without fresh criticism of the crackdown. On Friday, US State Department deputy spokesman Marie Harf said that Washington expects Turkey to comply with global standards in the monitoring of its finance institutions, when asked a question about Bank Asya.
Deniz Ünal, an economy expert at the France-based Institute for Research on the International Economy (CEPII), has said there has never been a similar case in Europe, in which the control of a bank has been handed over to a state-owned deposit fund by force.
Referring to the debates between Erdoğan and his opponents, Ergun Özbudun -- a prominent professor of constitutional law and political science who prepared a draft for a new constitution -- described the crackdown on the lender as a political rather than judicial or technical move.
Similarly, Duke University economics Professor Timur Kuran also criticized the intervention in the bank's board, saying that the ruling Justice and Development Party (AK Party) uses every means available, not only the BDDK, in order to silence dissenting voices in the country.
Published on Today's Zaman, 06 February 2015, Friday