February 9, 2015

‘Bank Asya intervention a veiled threat to gov’t critics’

Last week's midnight police raid on Turkey's largest Islamic bank, followed by a legally flawed intervention in the bank's board, is part of a covert war that the government is waging against its political rivals and critics, observers say.

The government-orchestrated intervention in Bank Asya on Feb. 3 came on the heels of threats and warnings from government figures, including President Recep Tayyip Erdoğan, against business groups, NGOs and entrepreneurs critical of government policies.

The decision by Turkey's banking watchdog, the Banking Regulation and Supervision Agency (BDDK) to hand over management control of 63 percent of the privileged shares of Bank Asya to the Savings Deposit Insurance Fund (TMSF), sends a message to government critics similar to that sent in previous politically motivated interventions in markets, experts say.

“The intervention in Asya's board has increased Turkey's political risk perception. …The ruling party's exploitation of inspections and red tape to put pressure on those with critical views is not new,” Serdar Sement, a political analyst at S. Bilişim said.

“This political intervention will backfire on markets. We know that all bank owners and banking sector experts in Turkey are aware of the government's arbitrary maneuvers in financial markets. Even pro-government figures are ready to confront the bureaucrats with this reality,” Sement added.

Erdoğan's government has in the past levied severe tax fines and seized the assets of some holdings and media firms perceived to be critical of his administration. The government has denied any political motivation in such cases. Some key conglomerates such as Koç Holding were among the businesses to suffer the burden of tax inspections and fines in the past.

Deniz Ünal, an economy expert at the France-based Institute for Research on the International Economy (CEPII), has said there has never been a European case in which control of a bank was been handed over to a state-owned deposit fund by force. “This is placing an increased pressure on foreign and local investors alike as they struggle to re-position their investments in Turkey. … Few people are going to park their cash in Turkey under these circumstances,” Ünal warned.

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, to silence dissenting voices in the country.

Emphasizing that the banking sector is vulnerable to such political interventions, economist Burhanettin Kuruşcu from Toronto University underlines that it is hard to argue that other banks in Turkey will not face the same political pressure in the future. “We are seeing that some large-scale Turkish investors may opt to exit the banking sector in an atmosphere where the financial sector's safety is not guaranteed by the state,” he said.

Experts have emphasized that it will be a catastrophe for Turkish markets if the government triggers a repeat of the 2001 domestic financial crisis, when control over many banks was transferred to the state fund, tens of thousands of people lost their jobs and hundreds of non-financial sector firms went bankrupt.

The executive chairman of Turkey's largest Islamic lender, Ahmet Beyaz -- who has been removed from his position -- said on Friday of last week he was confident of regaining management control of the Islamic lender, describing its takeover by regulators as illegal and temporary. Beyaz told reporters that shareholders in Bank Asya planned to file a lawsuit against the move by the state fund.

Published on Today's Zaman, 09 February 2015, Monday