By David O’Byrne
Turkish banking officials have seized control of Bank Asya, an Islamic bank believed to be controlled by supporters of US-based Turkish cleric Fetullah Gulen, while on the same day Turkey’s foreign ministry confirmed that Gulen’s Turkish passport had been cancelled.
Turkey’s banking regulator, the BDDK, announced in a statement issued late on February 3 that it had authorised the seizure of 63% of the equity of Asya Katilim Bankasi (Bank Asya) by Turkey’s Savings and Deposits Insurance Fund (TMSF), the body that guarantees bank deposits, on the grounds that Bank Asya does not have “transparent and clear partnership structures and organisation schemes” allowing effective auditing of the institution.
According to disclosures made on February 4 to the Istanbul stock exchange (BIST) by Bank Asya, the TMSF has taken over the rights of 120 unnamed shareholders and appointed a new board to administer the bank.
The future of Bank Asya has been the subject of speculation for more than a year, following the collapse of relations between Gulen’s Hizmet movement and the Justice and Development Party (AKP) government of Turkey’s prime minister, now president, Recep Tayyip Erdogan.
That fallout resulted in public institutions and state-owned companies removing deposits held at the bank, causing deposits to fall by 25% over the first half of last year and leading to trading in Bank Asya shares on the BIST being twice suspended during 2014. Shares in the bank fell by as much as 70% over the year.
Analysts cautioned in 2014 that while the bank had a healthy capital adequacy ratio, the loss of deposits coupled with a non-performing loan ratio of around 10% had caused the bank to suffer liquidity problems.
Following the collapse of talks over the possible purchase of Bank Asya from its existing shareholders by Turkey’s largest bank, state-owned Ziraat Bank, in mid-2014, Bank Asya launched a $100mn capital increase to overcome a short-term liquidity problem caused by the loss of funds.
The TMSF takeover of Bank Asya guarantees deposits held at the bank, as well as any dividends payable to the bank’s shareholders. However, it is unclear what the long-term future of the bank will be and whether control will be returned to its existing owners.
The precise ownership of the bank has long been the subject of speculation. Information published by BIST indicates that all of the bank’s shares are traded on the exchange, and does not name any individual shareholders. The bank itself reports five shareholders with less than 5% of equity each, 29% held by “others” and 54% traded on the BIST.
At the root of the bank’s problems is the souring of relations between Gulen’s Hizmet movement and the Turkish government over the past two years.
Previously, Gulen and his movement were widely understood to have been strong supporters of the AKP government, and to have had close relations with the party’s founders, Erdogan and former President Abdullah Gul. Photographs of a ceremony at the opening of the first branch of Bank Asya in 1996 show a beaming Gulen flanked by Gul and Erdogan, as then deputy Prime Minister Tansu Ciller cut the ribbon (see below).
Gulen left Turkey for self-imposed exile in the US in 1999 and has subsequently been reported as declining invitations from Erdogan to return. The precise reason for the collapse in relations between the two is unclear but Erdogan has made repeated statements over the past year blaming Gulen and his movement for being behind a series of graft probes against his government, and accusing the movement of forming a “parallel state”.
The investigations launched in December 2013 resulted in allegations of widespread graft at the highest levels of government and the resignations of four senior ministers. Subsequently the corruption inquiry was halted, with thousands of police, prosecutors and judges sacked or transferred to other posts.
The first anniversary of the launch of the graft probe was marked by a Turkish court issuing an arrest warrant for Gulen, leading to calls for his extradition. A foreign ministry official confirmed to BNE Intellinews on February 4 that a Turkish court had cancelled Gulen’s passport on January 22 on the grounds that it had been obtained fraudulently and that news of the cancellation had been transmitted to Gulen and to the US authorities.
However, he was unable to confirm whether any application had been made to the US for Gulen’s extradition, suggesting that such a move would have to be made by Turkey’s justice ministry.
Justice ministry officials declined to comment on the issue, as did a spokesman at the US embassy in Ankara, who confirmed that long-standing State Department policy is to not comment on extradition matters.