It doesn’t seem all that long ago that I was reporting on bullish statements made by the General Manager of Asya Emeklilik. This Islamic finance pensions company is linked to Turkey’s first Islamic finance bank Bank Asya.
Things can change very quickly in Turkey. Last week Bank Asya took out full-page advertisements in many national newspapers defending itself against what it terms a wide range of smears in the press, reminding people that any actions taken to try to destabilise a bank are against Turkey’s Banking Laws and notifying public opinion that they have opened 286 lawsuits against papers and journalists.
So why is the bank feeling embattled?
The problem is all linked to the public falling out that has happened between then Prime Minister now President Recep Tayyip Erdoğan and the Hizmet Movement linked with his former ally Muslim cleric Fethullah Gülen. The latter resides in the US state of Pennsylvania, which has given rise to “Pennsylvania” being used by Mr Erdoğan to denote an organisation he believes to be working as a “parallel state” in opposition to his government.
Following the Ak Party’s victory in local government elections earlier this year, in his balcony speech Mr Erdoğan threatened to “go into their lairs” to flush them out.
Now, in a country which has one of the highest number of journalists in jail in the world, and with Mr Erdoğan’s track record concerning criticism in social media I need to be careful what I say. Perhaps the safest is just for me to quote from Wikipedia:
The bank has been strongly tied to the controversial Gülen movement, led by the Islamic cleric and preacher Fethullah Gülen, and is widely considered to be founded and operated by his followers. By the end of 2013, the relationship between the Gülen movement and the ruling Ak Party soured, and the Gülen movement was declared a national security threat. Consequently, Bank Asya lost a large fraction of its deposits and its lucrative contracts with the government agencies. Its net income plummeted 81% on the second quarter of 2014. Its stocks are currently suspended by BIST (Istanbul Stock Exchange), due to the uncertainties about its ownership structure. Two separate acquisition deals (by Qatar Islamic Bank and by Turkish state owned Ziraat Bank) fell apart. Finally, on August 25, 2014, Moody's downgraded the bank with the statement "During this period, the bank's net income declined by 81% compared to last year. Additionally asset quality also deteriorated. These sharp deterioration trends in financial fundamentals resulted in lowering the bank's rating."
The authorities have also recently cancelled a contract enabling customers to pay their tax and social security bills through the bank. This feels like just one more nail in the coffin.
So where does all of this leave Asya Emeklilik? Customers’ pension money is invested in separate pension funds that are not only a separate legal entity but have separate custodianship. Life reserves are on balnce-sheet, but backed by blocked assets that are under the Treasury’s regulation.
It is clearly a worrying time for those working for the bank and its insurance company. Their fate is clearly in the hands of the regulator who under normal circumstances is expected to oversee the financial strength of a company and its owners.