November 11, 2015

EU progress report raps Turkey over Asya seizure, pressure on central bank

In its annual progress report for 2015, the European Commission has strongly criticized EU candidate Turkey for the government's politically motivated regulatory decision against recently seized lender Bank Asya and political interference in the independence of the country's central bank.

The long-awaited report was released on Tuesday, with the EU chiding the Turkish government for its interventions in financial institutions, damaging both investor confidence and the overall sentiment regarding property rights in Turkey.

In an assessment of improvements made during the past year with regards to stability in the financial markets, the report said: “The perception of politically motivated regulatory decisions continued, in particular when public authorities took over the management of Bank Asya. The regulator's action and the context in which the seizure took place raised questions about the proportionality of the decision.”

The Banking Regulation and Supervision Agency (BDDK) handed over management of Islamic lender Bank Asya to the Savings Deposit Insurance Fund (TMSF) in late May. Prior to the takeover, defamatory remarks made about the bank by high-ranking state officials led to mass withdrawals by pro-government companies. Bank Asya was founded by supporters of the ideas of Turkish Islamic scholar Fethullah Gülen and the government has been pursuing a witch hunt against the Gülen movement since corruption allegations implicating senior government figures came to the surface in December 2013.

Underlining that no progress has been observed in the area of property rights, the report continued, “The legal appeal by the dispossessed owners of Bank Asya should reassure investors about the strength and independence of the legal system.”

In the coming year, Turkey should take measures to re-establish trust in the independence of supervisory agencies and in particular the BDDK, the report added.

Pressure undermines credibility of central bank, EU warns

Touching on developments under the EU accession chapter concerning economic and monetary policy, the report said no progress was made in the past year, highlighting that Turkey's central bank lacks sufficient guarantees for the market.

“The executive continued to increase political pressure on the central bank to lower interest rates,” according to the report. “Increased political pressure on the central bank undermined its independence and credibility. In the coming year, Turkey should in particular avoid any political interference in the independence of the central bank.”

In March this year, President Recep Tayyip Erdoğan criticized the governor of the Central Bank of Turkey for keeping interest rates high, claiming that high rates were impeding economic growth. Erdoğan. “This is treason against the nation,” Erdoğan has said on a number of occasions.

Monetary policy should be focused more on its primary objective of price stability, the report said.

‘Interventions into corruption probes provoke suspicion'

Speaking about the judiciary and fundamental rights, EU stressed that government interference in corruption investigations has given credence to rumors of high-level corruption in Turkey.

“In December the prosecutors leading the corruption investigation were dismissed by the [Supreme Board] of Judges and Prosecutors (HSYK) and subsequently prosecuted on charges of illegal use of special investigative measures,” the progress underlined in a thinly veiled reference to possible attempts by the government to cover up investigations that implicated four then-Cabinet ministers as well as pro-government businessmen in corruption.

Adding that Parliament had decided against lifting immunity from prosecution of the four ministers, the report recalled that Turkey had registered a sharp drop in Transparency International's 2014 Corruption Perception Index, falling from the 53rd to the 64th least corrupt country.

'Public tender legislation needs reforms against corruption'

The commission's warnings also reached Turkey's public procurement process, which the report claimed was not in line with the EU legal framework.

Public tenders remain corruption-prone, largely due to various exemptions inserted into the framework law, particularly for tenders at municipal level, the report said, adding that reforms are needed to fix flaws and make them well-adjusted with EU regulations.

“Public procurement -- in particular concessions and public and private partnerships -- as well as land administration, energy, construction and transportation remain particularly vulnerable to corruption,” the report continued.

The Justice and Development Party (AK Party) has been increasingly criticized by opposition figures for its alleged role in creating a pro-government business cadre that has boosted its economic activity by winning public tenders to establish large construction and energy projects.

Published on Today's Zaman, 11 November 2015, Wednesday