June 1, 2015

Asya shareholders to appeal decision as reactions snowball against seizure

While reactions from various circles, including finance professionals, politicians and academics, continue to mount over the seizure of Bank Asya, the shareholders of the long-pressured lender are poised to initiate legal proceedings in a bid for a stay.

The Banking Regulation and Supervision Agency (BDDK) announced late on Friday that it had handed over control of the bank to the state-run Savings Deposit Insurance Fund (TMSF), in what most consider a politically motivated move, just days before the general election slated for June 7.

The bank was already administered by an interim board, assigned by the TMSF, after an ongoing campaign to intimidate it began on Feb. 3.

Süleyman Taşbaş, a lawyer representing the shareholders, told Today's Zaman that they will appeal the BDDK's decision, and request a stay in the coming days.

In Friday's statement, the banking watchdog claimed to have based its decision on financial woes, saying, “Problems experienced in the bank's activities -- with its financial structure, its partnership and management makeup -- presented a danger [...] in terms of confidence and stability in the financial system." Taşbaş blasted the justification, remarking: “The management has been in the hands of the TMSF since Feb. 3. It is a scandal to allege that seizure conditions, which did not exist [on Feb.3], would emerge on May 29.”

“What changed for the bank to have become a threat to the banking system, even though it was managed by the TMSF during this period? If this were true, the TMSF would be to blame [for poor management],” the lawyer maintained. Ruling out the possibility that the bank had any financial difficulties, Taşbaş warned that the board members will be held responsible for their decision in the future.

After suffering losses in 2014 on declining loans and deposits, the bank achieved a net profit of TL 13 million in the first quarter of 2015 and has a capital adequacy ratio of 18 percent, one of the highest in the sector.

Bank Asya, Turkey's largest Islamic lender, has long been in the news for its exposure to an intimidation campaign led by high-ranking state officials as well as pro-government media outlets and businessmen. Founded by sympathizers of the faith-based Hizmet (service) movement, also known as the Gülen movement -- inspired by Turkish Islamic scholar Fethullah Gülen -- in 1996, the bank became the target of harsh attacks from President Recep Tayyip Erdoğan and his supporters.

Erdoğan accuses supporters of the Hizmet movement of organizing “a coup attempt,” referencing investigations into corruption and bribery that implicated several Cabinet ministers, Erdoğan's sons and pro-government businesspeople. After the investigations were made public on Dec. 17 and 25, 2013, the government hastily covered them up. In mid-May, the top judicial body, the Supreme Board of Judges and Prosecutors (HSYK), dismissed four prosecutors and a judge who took part in the corruption probe.

Lender a long-term target

In the midst of pressure imposed by the president, state-owned firms and institutions last year reportedly withdrew around $1.7 billion or some 20 percent of deposits from Bank Asya.

The government also canceled tax collection and social security payment contracts with Bank Asya in August, while Erdoğan has, on several occasions, publicly denounced the bank, claiming it has poor financials and even once declaring that the bank had already sunk.

Pro-government newspapers carried almost daily reports on Bank Asya's woes earlier last year, portraying it as failing.

On Feb. 3, the BDDK temporarily handed over management control of the lender's majority shares to the TMSF, citing insufficient transparency stemming from shareholders' failure to submit certain identification documents to the watchdog. The regulator balked at giving up control, even after the shareholders provided the requested documents.

Shares in Bank Asya were moved to the stock exchange's watch list market last September, where companies are kept under surveillance.

On Friday morning, in the meantime, pro-government dailies reported that some 800,000 suspicious transaction records were illegally deleted by Bank Asya over the course of a recent year. The allegation was ruled out by the TMSF during the same day.

Reactions mount, alarm sounded over political intensions

The seizure, the latest in a prolonged smear campaign against the bank, has drawn the ire of experts, especially from financial backgrounds.

Democratic Left Party (DSP) Chairman Masum Türker said on Sunday the seizure decision was a warning against businessmen critical of the government in the run-up to the election.

“It was precisely the same reason that caused the 2001 crisis: interference by politicians in the banking system,” said Abdullah Çelik, a former chief executive of Bank Asya. He said Turkey had set up the BDDK under pressure from the International Monetary Fund (IMF) so as to ensure the autonomy of the financial system and prevent such crises.

“Bank Asya made its payments despite the 1,000 untrue media reports targeting it,” Çelik said in televised remarks. “The bank has fulfilled all of its responsibilities despite all the harassment, but you still go and seize it.”

In the meantime, Doğan Cansızlar, former head of the Capital Markets Board (SPK), said, “If there have been any deterioration in the bank's financial structure since that date [Feb. 3], it would be the BDDK that is responsible for such a deterioration.”

Even though Ali Babacan, the deputy prime minister in charge of economy, claimed there was no political motive in the Bank Asya seizure, pundits said the only possible reason is political intentions aimed at consolidating ruling party votes ahead of the upcoming election.

Zekeriya Temizel, the first president of the BDDK, said the article of the banking laws through which the watchdog ruled the seizure is applicable when the capital adequacy ratio of a bank is very low. “As I know and as confirmed by independent auditing firms earlier, the ratio is around 18 percent for Bank Asya,” Temizel added, expressing concerns over the pretext alleged by the regulator.

Former Turkish Central Bank Governor Durmuş Yılmaz also called the decision a political move, adding it lacks legal basis.

Twitter whistleblower Fuat Avni, whose earlier revelations have mostly proven to be true, wrote earlier on Friday that Erdoğan met with board members of the BDDK at 3 p.m. and ordered the chair of the watchdog to seize Bank Asya. “When the president found out that the [Justice and Development Party] AK Party would not be able to form a cabinet by itself, he decided to crank up the ‘Bank Asya issue',” Fuat Avni maintained.

“The Bank Asya decision is an arbitrary and unlawful act of oppression. Foreign capital will now fear entering the Turkish market,” economy professor İbrahim Öztürk said during a live interview late on Friday.

Former Privatization Administration (ÖİB) Vice President Süleyman Yaşar, meanwhile, described the decision as an intervention into property rights and warned the authorities about the heavy compensation that it may incur in the near future.

BDDK decision will not affect banking activities

The bank, on the other hand, has announced that the takeover will not influence its banking activities. In a statement posted on Bank Asya's website, the bank's administration said it will continue to provide “high-quality service in line with participation banking” to its customers as it has done in the past.

'Turkey to be penalized as in Kentbank case'

Sami Karahan, a professor of commercial and banking law, in the meantime, said the seizure is an act of “political hijacking” of private property and is completely against the law and the Constitution.

“Bank Asya shareholders will file a suit against the decision. They will receive damages with a large compensation, like in the Kentbank case, the Demirbank case and as in the case of Russia-based private lender Yukos, but Turkey will pay the costs. [Also] investors will not come to Turkey as the property rights of citizens have been abused in the country,” he added.

Following the domestic banking crisis of 2001, Kentbank was seized by the government and handed over to the BDDK. The owner of the bank appealed the decision with the European Court of Human Rights (ECtHR), demanding that its operating rights be returned and that $4.13 billion be paid in compensation. The court found the confiscation unfair.

In a separate case, the ECtHR is still hearing the case of Demirbank, which was forced to sink in 2000. Last year, the ECtHR also awarded shareholders in Yukos 1.9 billion euros ($2.6 billion) in damages. Yukos, once worth $40 billion, was broken up and nationalized a decade ago, with most of its assets handed to Rosneft, an energy giant run by an ally of President Vladimir Putin.

Published on Sunday's Zaman, 31 May 2015, Sunday