Women waving Turkish flags take part in a protest against the seizure of the Islamic Bank Asya, in front of a Bank Asya branch in downtown Ankara yesterday. The action by Turkey’s banking regulators follows a run on deposits at Bank Asya last year.

Reuters/Istanbul

Turkey has taken control of Bank Asya, the Islamic lender caught up in a feud between President Tayyip Erdogan and US-based cleric Fethullah Gulen.
The action by Turkey’s banking regulators follows a run on deposits at Bank Asya last year when the lender became embroiled in the power struggle between Erdogan and Gulen, whose followers had set up the bank.
“I think what is necessary has been done,” Economy Minister Nihat Zeybeki told reporters. “For financial markets this has ended speculation and brought about a safer environment.”
Turkey’s Savings Deposit Insurance Fund, which has powers to deal with troubled banks, said the move was designed “to protect the bank’s shareholders, clients, the banking sector and Turkish economy and prevent a new failed bank.”
But Turkey’s move to seize control has prompted accusations of political meddling that could also hurt the country’s reputation with international investors.
Outside Bank Asya’s headquarters in Istanbul a group of around 100 people gathered behind police barriers to protest against the regulator’s action, including women in headscarves.
“This is an operation with purely political motives,” said media sector worker Muhammed Agcagozu, 26, who like many Bank Asya customers has come out to support it against what they say is a government-orchestrated bid to scuttle it.
Turkey’s Banking Regulation and Supervision Agency cited insufficient transparency to allow for proper regulation of the bank as the reason for its decision to take control.
Bank Asya said yesterday that its operations would not be affected. It also named a new nine-member management board in a separate statement to the Istanbul stock exchange.
Islamic lenders’ association general secretary Osman Akyuz told Reuters the action would not create systemic risk in the banking market.
But Selin Sayek Boke, deputy chairman of the main opposition CHP party, said the move was a “scandal.” “The destruction of hard-won institutional respectability and credibility for political goals is wrecking the reputation, power and future of Turkey’s economy,” she said in a statement.
Shares in other companies linked to Gulen’s followers fell initially after the regulator’s move, but then rebounded. Gold miner Koza Alt’n rose 0.3%, mining company Koza Madencilik fell 1.8% and energy firm Ipek Dogal Enerji fell 1.3%.
The main Istanbul share index fell 1.29%, with banks down 2.49%, also pressured by the central bank’s decision on Tuesday not to hold an early policy meeting to cut rates.
Investment analysts expressed concern about the impact of the regulator’s action on investors’ view of Turkey.
“This operation is very much linked to a personal grudge and it goes down very badly with investor communities. Once this perception is spread, you can’t change it,” Global Source Partners economist Atilla Yesilada said.
Bank Asya depositors, including state-owned firms and institutions, last year withdrew 4bn lira ($1.7bn), or some 20% of its deposits, according to media reports.
Shares in Bank Asya, of which around 54% are publicly traded, were moved to the stock exchange’s watchlist market in September, where companies are kept under surveillance.
The shares trade for a limited time each day.
They fell 1.64% to 0.60 lira on the watchlist companies market yesterday. They were at 1.24 lira when they were suspended from the main Istanbul market last August.
A 2023 dollar bond issued by Bank Asya jumped 10 cents in price to its highest level since mid-Sept 2014.
“The government intervention into Bank Asya is constructive for its sukuks (Islamic bonds) if negative for the share price, by removing uncertainty about plans for it,” Jefferies analyst Richard Segal said. “The drain on its operations may now be reversed.”
In November, Bank Asya cut a third of its workforce and more than a quarter of its branches in a turnaround attempt.
Turkish media reported on Tuesday that Turkey had cancelled Gulen’s passport in a further escalation of Erdogan’s campaign against the cleric who has lived in self-imposed exile in Pennsylvania since 1999.