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Turkey Seizes Bank Asya Week Before General Election

Turkey Seizes Bank Asya Week Before General Election

The Turkish government has seized control of Bank Asya following a 18-month long political battle between President Recep Tayyip Erdogan and exiled Islamic cleric Fethullah Gulen – a move seen as increasing risk premium for Turkish assets a week before parliamentary elections.

According to Ates Buldur, analyst at Zurich-based Credit Suisse, “Bank Asya is known for its proximity to the Gulenist movement and has been a subject of the political tensions in Turkey since December 2013,” Bloomberg reported on Monday. The analyst believes that the latest developments surrounding the Istanbul-based Islamic lender, “are negative for market sentiment and are leading to a higher risk premium for Turkish assets in general.”

After having acquired control of 63% Asya Bank’s privileged shares in February, on Friday Turkish banking authorities seized shareholder rights, control rights, and management rights of the bank. In this way, control of the bank now is with the state-run Savings Deposit Insurance Fund, which answers directly to the prime minister.
The move came just a week before critical parliamentary elections, increasing investor concerns that the government is using regulatory pressure to settle scores with its political opponents.  Over the weekend, Prime Minister Ahmet Davutoglu and Deputy Prime Minister Ali Babacan denied the latest move was politically motivated. According to the government whistleblower Fuat Avni, however, the seizing of Bank Asya by Turkey’s Banking Regulation and Supervision Agency (BDDK) is an attempt to consolidate votes for the ruling Justice and Development Party (AKP) ahead of the election, todayszaman.com said.

Corruption allegations implicating ministers close to then-Prime Minister Erdogan shook the Turkish government in December 2013. Erdogan, elected President last year, blamed the allegations on supporters of Gulen, who is living in the United States. According to Erdogan, the corruption scandal was an attempt by the exiled preacher and his followers to unseat him.