Experts warn Asya handover may cause domino effect

Last weekand’s controversial intervention into Turkeyand’s largest Islamic lender is a violation of banking laws and could trigger losses in what market experts warned on Tuesday could easily have a domino effect on the Turkish banking sector.
Since the handover of Islamic lender Bank Asya by the Banking Regulation and Supervision Agency (BDDK) to the Savings Deposit Insurance Fund (TMSF) last Friday, reactions have continued to pour in. US-based academics have warned that the political intervention into the bank will result in economic consequences. and”In a country where the rule of law has not arrived or is not being ensured, investors will not make long-term investments,and” said Quinnipiac Universityand’s Dr. Osman Kiliandc, speaking to Todayand’s Zaman.
Former Finance Minister Zekeriya Temizel, who helped found the BDDK in 2000, said on Monday the intervention into Bank Asya will be a severe blow for the entire countryand’s financial markets. and”The international arena will react unbelievably strongly against these illegal measures, which violate universal principles of law,and” Temizel explained.
and”We are living in a period that is characterized by a lack of justice and respect for ownership,and” said Dr. GandOkhan Karahan of the University of Alaska Anchorage, speaking to Todaysand’ Zaman.
and”Turkeyand’s economy has nearly come to a halt in the past two years. The countryand’s greatest need is foreign investors. As major companies have done recently, investors may quickly exit from Turkey,and” said Kiliandc, warning that the Bank Asya decision will have a direct and negative impact on foreign investment.
and”The decrease of trust in banks may give rise to a period of economic chaos with no end in sight,and” added Kiliandc, comparing Turkey to Argentina during a troubled period in the 2000s. and”Playing games with the banking system, which is the most important part of a capitalist system, could give rise to a very problematic atmosphere of economic insecurity,and” Kiliandc said.
and”The leaders of this country are diminishing the capacity of those who see a better future for Turkey,and” said Karahan. and”I am not referring to these people as the andlsquooppositionand’ because to think that only a couple opposition parties are able to understand the destruction that the ruling Justice and Development Party [AK Party] has brought to Turkey would be unfair to the 75 million people living here,and” Karahan said.
Meanwhile, shareholders of Bank Asya said they planned to challenge the takeover of the Islamic lender by regulators, a lawyer said on Monday. Shareholders of the bank will bring charges against both the banking watchdog and Turkeyand’s insurance deposit fund, lawyer Sanduleyman Taibai said. andquotAny operation would be illegal and unconstitutional and carry with it great political risk. With just five to six days to go before the election, the aim must be to silence and frighten the media,andquot he added.
Taibai disputed that the latest regulatory action had been done to protect depositors, noting that Asya was profitable again. andquotYou donand’t need to protect depositors in a profit-making company. If a company is making profits, it will continue operating. Only if itand’s making a loss, would you need to protect depositors and ensure market stability.andquot Shares of Bank Asya were suspended temporarily on the Istanbul watch list market on Monday after Fridayand’s seizure of the bank, the Istanbul bourse said.
h2European Commission says Asya handover raises questionsh2 The European Commission has said the context in which the recent seizure of Turkeyand’s Bank Asya took place raises a number of questions, stressing that such a bold step can only be taken under clearly and strictly defined conditions.
Responding to a question by Todayand’s Zaman on the Bank Asya takeover, European Commission spokeswoman Maja Kocijancic said the commission is carefully assessing recent developments that resulted in the seizure of the bank. and”While under the European Union acquis there may be situations in which the takeover of a bank by the state may become justified, such a step can only be taken under clearly and strictly defined conditions, which aim at carefully balancing all the justified interests of concerned parties. Proportionality and reasoning for such a takeover is key in such cases,and” she said.
Kocijancic added that it is important for Turkey not to damage the confidence of the financial sector and reassure investors that their money will be protected in the country and that all decisions taken are based solely on clearly defined conditions without any other factors such as political interference playing a role. She added that any other scenario would call into question the independence of the national regulator and be a cause for concern.
The BDDK announced late on Friday that it had handed over control of the bank to the state-run TMSF after a political campaign had targeted the bank for many months. Bank Asya, founded by sympathizers of Turkish Islamic scholar Fethullah Gandulen, has been targeted by Turkish President Recep Tayyip Erdogan since a corruption scandal implicating people in his inner circle erupted in December 2013. Erdogan has branded the corruption scandal a and”coup attempt and blames it on the Gandulen movement, also known as the Hizmet movement, inspired by Gandulen.
Pro-government newspapers carried almost daily reports on Bank Asyaand’s supposed woes earlier last year, portraying it as a failing bank being propped up by members of the Gandulen movement. The government also canceled tax collection and social security payment contracts with the bank in August, while Erdogan has on several occasions publicly targeted the institution, claiming it has poor financial management and even once declaring that the bank had already sunk.

SOURCE: Today’s Zaman