September 12, 2014

US economist 'shocked' over anti-Bank Asya campaign

An American economist has expressed "shock" over anti-Bank Asya campaign and a government-orchestrated program to sink or seize it, stressing that this move sends wrong signal to both domestic and foreign investors.

Indrit Hoxha, an economist from Penn State University, said in remarks published by Zaman America on Thursday that the attempts to sink Bank Asya is "disturbing at many levels."

On political level, he asked, "how can government through its regulatory agencies intervene to the markets and attack certain actors in the market?" These events, he said, give the wrong incentives to the markets and send out the wrong signals to future participants to the market.

Earlier this month, several Turkish media outlets reported that Turkey's bank watchdog BDDK has taken sweeping powers at the Islamic lender, which has seen depositors flee and bad loans soar since it has become a target for assaults by the Turkish government for nearly a year.

Last month, the government cancelled tax collection and social security contracts with Bank Asya, a move seen by observers as an attempt to weaken the lender.

However, Bank Asya said those actions would not have a significant impact on its activities.

Ratings agency Moody's cut the bank's rating by eight notches in two actions recently.

The economist noted that the role of government and its agencies in financial markets should be regulatory. "Picking one or some of the financial actors and attacking it/them is counter-intuitive and counterproductive for the economy," he highlighted.

"If Bank Asya, or any other bank for that matter, goes bankrupt or is forced into an acquisition something is for sure, Turkey and Turkish citizen will have a lot to lose," the economist stated, adding that the largest group that will get affected will be the customers of Bank Asya, both depositors and borrowers.

According to Hoxha, the worst effect will be the long term negative effect that it will have on Turkish economy. He argued that this will send out the wrong signal and incentives to both domestic and foreign investors in financial sector and in real sectors (non-financial sectors).

"The message that investors would get is that their investment would not be safe in this country. This could lead to an outflow of funds from Turkey or at least a decrease in the future inflows of foreign funds. The long term span of the negative effects on Turkish economy will be detrimental," Hoxha said.

Not only in the US, Hoxha claimed, but in any developed country, this scenario would not be "imaginable."

The government-led assault to sink Turkey's largest Islamic lender due to its affiliations with the Gülen movement has stirred a public movement, with thousands of people rushing to deposit money with the bank to aid its struggle for survival.

Mobilized by waves of social media messages, such as those under the Twitter hashtag #MilletBankAsyayaSahipÇıkıyor (NationProtectsBankAsya), people are flocking to the bank's branches to deposit their money. Some have sold their jewelry, some have sold their cars, and some have even drawn loans from other banks to deposit them with Bank Asya so that the bank is not short of money, amid an unprecedented government attempt to collapse a private bank out of animosity towards a civil society movement.

Published on Today's Zaman, 12 September 2014, Friday

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