March 4, 2015

Asya shares partially seized as S&P warns of risks

Turkey's banking watchdog, the Banking Regulation and Supervision Agency (BDDK), said on Wednesday regulators had taken control of a small stake in Turkey's largest Islamic lender Bank Asya over what it described as an illegal share transaction.

The moves comes right after a warning from the international ratings agency Standard and Poor's (S&P). The S&P said on Wednesday incidents surrounding Turkey's Bank Asya, which ended in its management takeover by regulators in early 2015, showed the potential for political risks to spill over into the financial system.

“The incidents in 2014 surrounding Bank Asya, which ended with the regulatory action against it in early 2015, illustrate the potential for political risks, or the perception of it, to directly or indirectly spillover into the financial system" S&P said in a report titled ‘Turkish Banks Face More Regulation And Greater Competition' released on Wednesday.

"Our ratings outlook on Turkish banks is negative and mirrors the outlook on our sovereign ratings. Therefore, rating actions on Turkish banks would by and large hinge upon any on the sovereign." Active asset management was becoming more critical, the S&P warned, stressing that the new rules were not only forcing banks to put the brakes on unsecured lending but were also eating into bottom-line earnings through both lower interest margins and lower fee and commission income. The BDDK said on Wednesday that Turkey's Savings Deposit Insurance Fund (TMSF) seized shares held by publishing company Sürat Basım and construction firm Forum İnşaat because of irregularities in the January sale of their parent company to a Dutch firm. Initial attempts by Reuters to reach the two companies for comment were unsuccessful.

The parent company Kaynak Holding, is close to Gülen Movement, like most other shareholders in Bank Asya. Kaynak holds 6.47 percent of the bank's shares. As of November last year, Sürat and Forum held a total of 6.55 percent of Bank Asya, according to the bank's regulatory filings. The BDDK statement said only preferred shares were seized, but did not specify the size of the holding. The Banking Regulation and Supervision Agency (BDDK) had ruled on Feb. 3 that management control of 63 percent of the privileged shares of Bank Asya, be transferred to the Savings Deposit Insurance Fund (TMSF), citing a lack of transparency in the organizational and partnership structure of the lender.

Market experts say the move was politically motivated and legally flawed since 80 percent of the bank's shareholders had already sent the required documents to the watchdog by the time of the midnight raid on the headquarters of the lender; however, the BDDK did not accept them and instead authorized the takeover. Bank Asya depositors, including state-owned firms and institutions, last year withdrew 4 billion lira ($1.7 billion), or some 20 percent of its deposits, according to media reports.

Shares in Bank Asya, of which around 54 percent are publicly traded, were moved to the stock exchange's watchlist market in September, where companies are kept under surveillance. The shares trade for a limited time each day.

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