February 4, 2015

Gov’t-backed Bank Asya decision sparks anger, likely to face int’l court

The decision to take over control of Turkey's largest Islamic lender, Bank Asya, has drawn much public ire, with many emphasizing the deteriorating image of the banking industry amid the worsening investment environment and arguing that the decision is likely to be reversed in both local and in international courts.

The Savings Deposit Insurance Fund (TMSF) late on Tuesday took over 63 percent of Bank Asya's privileged shares, citing violations of banking regulations on transparency in organizational and partnership structure and appointed a new board of directors, in the latest example of a clampdown imposed by the government on dissident voices and any institutions affiliated with opponents of the government.

Commenting on the development, Professor Doğan Cansızlar, the former head of the Capital Markets Board (SPK), said on Tuesday that raiding a private lender with police forces is objectionable for the image of the whole banking industry in Turkey. Cansızlar said the decision by the Banking Regulation and Supervision Agency (BDDK), the institution which made the decision to name a new board and which ordered the TMSF to take over management of the bank, is based on superficial grounds. Nevertheless, Cansızlar added, it is completely wrong to tear down the image of a bank without reasonable justification.

Cansızlar noted that BDDK officials had been inspecting the financial structure of the bank for the last 13-14 months but had failed to find any irregularities, implying that the bank's balance sheet is quite solid. Though it is not a seizure decision, Cansızlar added, the takeover decision is severe enough to tarnish the reputation of the bank.

“The ongoing attacks to defame Bank Asya are jeopardizing both local and foreign investments. This move against the bank may be appealed to both high courts in the country and international courts as well. The subject also concerns the SPK since 37 percent of the bank's shares are openly traded on the stock exchange. In order to preserve the rights of investors, the SPK should have been part of the decision-making process,” Cansızlar added.

Noting earlier comments made by the government and by President Recep Tayyip Erdoğan damaging the credibility of Bank Asya, Cansızlar said the BDDK and the SPK remained silent for months despite the fact that even tiny rumors have the potential to pose the risk of contagious panic in the finance sector.

Since the major corruption and bribery investigations that were made public on Dec.17 and 25, 2013, the government and its cronies have been running a smear campaign against those they believe to be behind the investigations.

The headquarters of Turkey's most highly circulated paper Zaman was raided on Dec. 14, 2014 due to its dissenting publications. Bank Asya also received its share of the government's intimation campaign through which the government canceled tax collection and social security payment contracts with the bank in August.

In spite of the fact that the finance industry depends on very fragile confidence-based relations, Erdoğan once said the bank had already collapsed. Despite diligent efforts by the government and pro-government media against Bank Asya, the lender currently continues to hold one of the highest capital adequacy ratios among all banks in the country.

Cenk Karayel, one of the founding partners of the bank, had said that in order to update some information, the BDDK had requested certain documents one-and-a-half months ago from privileged shareholders. The documents had to later be collected from the Land Registry and bailiff's offices within 15 days, but some of the documents remained uncollected.

Underlining that the bank is an openly traded company with thousands of shareholders, Karayel said some of the shareholders likely failed to collect the documents since they are overseas. Highlighting that such issues typically do not even require a warning to the bank, Karayel said Turkey may be forced to pay sizeable compensation in the future after an international court such as the European Court of Human Rights (ECtHR) reverses the decision as was the case in the past.

Turkey had previously been forced to pay a fine to the Süzer Group for bankrupting Kentbank. Following the domestic banking crisis of 2001, Kentbank was seized by the government and handed over to the BDDK. However, the owner of the bank appealed the decision with ECtHR, demanding its operating rights be returned and $4.13 billion to be paid in compensation.

The ECtHR ruled that the confiscation of the bank was unfair and gave the Turkish government and Kentbank six months to reach a compromise to resolve the issue. After some time, the Süzer Group agreed oddly enough to withdraw from its $4.13 billion suit at the ECtHR and ended its efforts to obtain a new banking license.

In the meantime, the Turkish Confederation of Businessmen and Industrialists (TUSKON) in a press release has called the decision to take over control of the bank as an extremely unfortunate and dangerous practice for the whole economy that has damaged the confidence of investors and businessmen in the country.

Opposition Republican People's Party (CHP) Economic Policy Vice President Selin Sayek-Böke also commented on the issue, saying if economic decisions become the tools of political incentives, badly needed investments will flee Turkey.

The credibility of state institutions which has been earned over the years are also damaged by such attempts, Böke added, underlining that the cost of losing the independence of the central bank and the BDDK will be substantial for the Turkish economy.

The Journalists and Writers Foundation's (GYV) also strongly criticized the TMSF's action. “We condemn the intimidation operation of the government, which has failed to sink Turkey's largest Islamic lender,” the GYV said in a statement released on Wednesday.

The GYV said the operation aims to intimidate depositors of the bank by creating the impression that the state has seized the bank thereby leading them to withdraw their savings from the institution.

“We have full belief that Turkey will be a state of law one day and those involved in this unlawfulness and oppression targeting Bank Asya will be held accountable,” the statement said.

Published on Today's Zaman, 04 February 2015, Wednesday