ISTANBUL—Turkish authorities seized Bank Asya, ending a
long-running battle to bring the Islamic lender firmly under
government control after the company became embroiled in a
political feud.
The move, announced by Turkey's Banking Regulation and
Supervision Agency late Friday, comes just a week before critical
parliamentary elections and marks the latest step in an 18-month
saga that saw the country's largest Islamic lender lose half of its
assets as political attacks fueled a run by depositors.
Bank Asya now belongs to the state-run Savings Deposit Insurance
Fund, which answers directly to the prime minister.
"It has been determined that problems experienced in the bank's
financial structure, partnership and management makeup, as well as
issues in its operations, present a threat the confidence and
stability of the financial system," the banking watchdog said in a
statement, adding that investors' rights were also at risk.
Bank Asya's total assets amount to less than 1% of Turkey's $800
billion banking industry. In February, the banking watchdog
transferred 63% of the lender's preferred shares to the Savings
Deposit Insurance Fund, giving it control of Bank Asya's management
and stoking concern among investors that the government was
deploying regulators to settle political scores.
The bank said Friday's regulatory takeover wouldn't affect its
operations, and that the lender "will continue to provide quality
services." The state-run fund has been given the task of arranging
a partial or wholesale transfer of Bank Asya to another firm,
including through a sale or merger, the banking watchdog said.
Officially known as Asya Katilim Bankasi AS, the lender emerged
as a major front in a bitter struggle between President Recep
Tayyip Erdogan and a U.S.-based Turkish cleric, Fethullah Gulen,
whose followers founded the bank.
Bank Asya had been a star in Turkey's effort to boost the market
share of Islamic banks, which operate under the principles of
Islamic law, or Shariah, sharing profits and losses, while
prohibiting the collection and payment of interest. Foreign
investors including BlackRock Inc. and Vanguard Group had held
about a third of the 54% of shares that were publicly listed.
But the bank's fortunes turned after prosecutors associated with
Mr. Gulen's religious network pressed corruption charges against
Mr. Erdogan's ministers and business allies in December 2013. Mr.
Erdogan, then prime minister, accused his one-time ally of plotting
a coup to topple him, while pro-government newspapers attacked Bank
Asya as the financing arm of the imam's push to take over the
state.
Mr. Gulen, who lives in self-imposed exile in Pennsylvania, and
Bank Asya deny the charges. The cases against Mr. Erdogan's allies
were dropped by prosecutors who replaced the original attorneys on
the sprawling corruption investigation.
As Mr. Erdogan started going after Mr. Gulen's followers in the
bureaucracy, removing from their posts thousands of police
officers, prosecutors and judges suspected of sympathizing with the
imam, regulators started reviewing the bank. State-run firms and
government clients withdrew deposits, and Mr. Erdogan said the
lender was bankrupt, a claim the bank disputed.
The president also scuttled partnership talks with Qatar Islamic
Bank, while one of his advisers derailed a potential Bank Asya
takeover by T.C. Ziraat Bankasi AS, the state-owned lender that is
Turkey's biggest bank by assets.
"Turkey's business environment is becoming increasingly
politicized," said Anthony Skinner, a political risk consultant
covering Turkey at U.K.-based firm Verisk Maplecroft. "Investors
have long complained about changing regulations and arbitrary
decision-making—the politicized nature of decision-making has
become all the more apparent over recent years."
The government is also targeting companies outside of Mr.
Gulen's network, Mr. Skinner said, citing Turkiye Is Bankasi AS and
Koc Holding AS, the biggest Turkish conglomerate, which faced tax
probes after Mr. Erdogan accused the firm of supporting
antigovernment protests.
Officials deny allegations that Bank Asya was seized because of
political reasons. Deputy Prime Minister Ali Babacan, who oversees
the economy, on Saturday said regulators wouldn't have waited for
more than year if the decision was politically motivated, adding
that he "presumes" the banking watchdog has strong legal
grounds.
Mr. Erdogan and the government have made eradicating what they
call Mr. Gulen's "parallel state" from Turkey a key campaign issue
in last year's local and presidential ballots, as well in as the
parliamentary elections that will take place next Sunday.
While most investors compartmentalize politicized regulatory
actions against Bank Asya as a unique incident in a broader battle,
they also point to it as the beginning of a potentially worrisome
trend. Fitch Ratings has called the episode a "black mark" on
Turkey's prudent banking regulations since the 2001 financial
crisis.
But criticism hasn't deterred Turkey's leadership.
"Those who betray this country will pay for it," Mr. Erdogan
said last week in a speech to small-business owners, asking them to
support the government in the elections. "We need unity."
Write to Emre Peker at emre.peker@wsj.com
Access Investor Kit for Turkiye Is Bankasi AS
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=TRAISCTR91N2
Access Investor Kit for Koç Holding AS
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=TRAKCHOL91Q8
Access Investor Kit for Asya Katilim Bankasi AS
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=TREAYKB00014
Access Investor Kit for Asya Katilim Bankasi AS
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0464941006
Access Investor Kit for Turkiye Is Bankasi AS
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US9001514085
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
