Turkey

Uncertain Future for Islamic Finance After Turkey Elections

President Recep Tayyip Erdogan’s plans to grow Islamic banking in Turkey may be facing an uncertain future. The ruling AK Party - formerly led by Erdogan - failed to win enough seats at the general election to form a single-party government. The result was a blow to the power of the man who has driven the industry in Turkey. The vote raises the possibility of a minority administration, a coalition government or another election in the $800 billion economy. Stocks, bonds and the lira plunged the day after the vote. Turkey’s cabinet appointed Mehmet Ali Akben to head the Banking Regulation and Supervision Agency in May. Akben is known to be strongly supportive of the government’s participation banking agenda. Still, political uncertainty could drag on.

Turkish Dep. PM: Bank Asya in the hands of regulator

Turkish Deputy Prime Minister Ali Babacan said on Tuesday that Bank Asya is in the hands of the Turkish banking watchdog and its insurance fund. On May 29, Turkey's Banking Regulation and Supervision Agency (BDDK), the country’s banking watchdog, ruled for the complete takeover of all shares of Bank Asya by the Savings Deposit Insurance Fund (TMSF). The deputy minister stressed that the BDDK and TMSF are independent organizations. Separately, Turkish stock exchange regulators on Tuesday lifted the ban on the trading of Bank Asya’s shares one day after it was halted. The bank’s shares opened at Friday’s closing prices 0.76 Turkish lira. The shares dropped to 0.69 lira, a loss of 9.21 percent.

Shareholders vow to challenge seizure of Turkey’s Bank Asya

Regulators announced on Friday they would take over the lender, saying its financial structure and management presented a threat to the financial system. Shareholders of the bank will bring charges against both the banking watchdog and Turkey's insurance deposit fund, lawyer Suleyman Ta?ba? said. The lawyer disputed that the latest regulatory action had been done to protect depositors, noting that Asya was profitable again. The editor of the Gülen-affiliated Zaman newspaper said he was concerned about further arrests and seizures of businesses with links to the cleric. Shares of Bank Asya were suspended temporarily on the Istanbul watchlist market on Monday after Friday's seizure of the bank, the Istanbul bourse said.

Turkey Not Goldman to Manage Sale of Bank Asya After Seizure

Turkey’s government said it plans to find a buyer for Bank Asya after completing the nationalization of the Islamic lender with the seizure of its shares on Friday. The bank may now be sold whole or in parts, according to an announcement in the Official Gazette on Saturday, which didn’t give more detail on the potential sale. Twelve months ago Goldman Sachs Inc. was hired to manage a sale. The New York bank set up exclusive talks with Qatar Islamic Bank SAQ., only for these to fall apart after Deputy Prime Minister Ali Babacan said that the government preferred that the Istanbul-based lender be acquired by a Turkish state bank. The regulator has wide discretionary powers after a takeover, including to partially or completely transfer the bank’s assets to another bank, or sell to a third person.

Bank Asya unlawful seizure entirely political, says owners’ lawyer

Speaking in the aftermath of the Banking Regulation and Supervision Agency’s seizure of publicly traded Islamic lender Bank Asya, Lawyer Süleyman Ta?ba? vows that the continued illegal measures were political and illegal. He states that the unjust seizure will inevitably come to an end, even if it means going to the European Court of Human Rights (ECtHR). Ta?ba? also expressed that the takeover was an attempt to incite panic and cause a run to the bank, calling for the customers to display the same solidarity as in the aftermath of February 3 measure. Banking sector experts warn that illegal bank takeovers have cost Turkey dearly in international courts.

Gülen linked Bank Asya deleted 800,000 transaction records

Information technology specialists from Turkey's banking watchdog, the Banking Regulation and Supervision Agency (BDDK), discovered that 800,000 transaction records were deleted at Bank Asya, which was seized by the Saving Deposit Insurance Fund (TMSF) in February. According to an investigation, the mentioned transactions were deleted just after the Dec. 17, 2013 operation. After the Gülen Movement was included in the Red Book as a national security threat and deemed a terrorist organization, the accounts of some of the people that are included in the movement will be investigated. In case any relations to the movement's members are revealed, the bank may be forcibly terminated for national security reasons.

UPDATE 2-Turkish authorities take over Islamic lender Bank Asya

Turkish authorities said on Friday they had decided to take over Bank Asya. The move was announced by the banking watchdog BDDK just over a week ahead of a parliamentary election and on the same day that Erdogan launched the Islamic business of the state-owned Ziraat Bank. The BDDK statement said it acted as "problems experienced in the bank's activities with its financial structure, its partnership and management make-up presented a danger ... in terms of confidence and stability in the financial system." It handed over control of the bank to Turkey's Savings Deposit Insurance Fund (TMSF) which said that the bank's operating licence had not been cancelled at this stage.

Turkish Bank Watchdog Seizes Remaining Bank Asya Shares

Turkish regulators seized the remaining shares in Bank Asya, the Islamic lender taken over by authorities this year amid a political dispute. The move against the bank was announced late Friday on the website of the bank watchdog. The aim was to protect savers and ensure “stability and confidence in the financial system,” it said. Deputy Prime Minister Ali Babacan denied that the seizure was politically motivated in an interview late Friday. The seizure comes before parliamentary elections on June 7 and about two weeks after the cabinet appointed Mehmet Ali Akben, a career Islamic banker and board member of the state Savings Deposit Insurance Fund, to head the Banking Regulation and Supervision Agency.

Turkey’s PM Says Seizure of Bank Asya Shares in Line With Law

Denying any political motives, Turkey Prime Minister Ahmet Davutoglu says regulators’ action purely based on “technical, fiscal and financial” evaluation. Turkish regulators on Friday seized remaining shares in Bank Asya. Appeals process is open on Bank Asya seizure: Bank Asya went beyond “normal banking” due to ties with "parallel state,” Davutoglu says in reference to supporters of Islamic preacher Fethullah Gulen, accused of plotting to overthrow the government.

Turkish President Tayyip Erdogan expects state banks to launch Islamic units soon

Turkish President Tayyip Erdogan said he expected other state banks to establish Islamic banking units soon after state-run Ziraat launched an Islamic unit on Friday. Erdogan, speaking at the launch ceremony of Ziraat's new business, said he also expected Ziraat to set up an Islamic insurance unit.

Capital markets are the ‘second wing’ of the Turkish economy

Comprehensive reforms in Turkey’s capital markets over recent years have exceeded EU standards and bred confidence among investors, says the Chairman of the Capital Markets Board Vahdettin Erta?. The Turkish government has a plan to develop the participation banking sector and also the instruments we provide under Islamic principles. The sukuk regulation was renewed in 2013 and also a new regulation was made after the reform on the private pension system which allows for the establishment of Sharia-compliant pension funds. The government also has a plan to develop the Islamic insurance (takaful) industry.

UPDATE 1-Turkey's Erdogan urges state lenders to step up Islamic banking

Turkish President Tayyip Erdogan said the launch of Ziraat Bank's Islamic business should help to attract new funds to Turkey and urged other state lenders to help to triple Islamic banking's share of the market by 2023. Speaking at Friday's launch ceremony for Ziraat's new business, Erdogan said he also expects Ziraat to set up an Islamic insurance operation and called on other state lenders to introduce Islamic banking divisions soon. Turkey's other two state lenders, Vakifbank and Halkbank, have also been looking to set up Islamic banks as part of the government's efforts to develop the sector and tap a pool of cash-rich investors in the Gulf and southeast Asia.

Bank Asya has not sent all required documents - Turkish banks watchdog

Islamic lender Bank Asya has not yet filed all the documents sought by Turkey's banking watchdog BDDK after the regulators took over the bank's management and seized a small stake in it earlier this year, BDDK head Mehmet Ali Akben said on Wednesday. The government has said the management of the bank, founded by followers of President Tayyip Erdogan's ally-turned-foe Islamic cleric Fethullah Gulen, was taken over because it failed to meet some legal criteria.

Babacan praises Islamic banking model

Turkish Deputy Prime Minister Ali Babacan said on Wednesday that the growth of Islamic banking would strengthen Turkey’s financial system, praising the rapid growth of Islamic banks. Speaking at the 14th General Assembly meeting of the Participation Banks Association of Turkey in Istanbul, Babacan said the latest global economic crisis showed that interest-free financial methods are much more reliable, much more stable, and much more robust. His remarks came after one of Turkey's largest state-controlled banks, Ziraat Bank, was authorized by the country's banking regulator to start operations in its Islamic banking division last week. He also stated that an insurance system should also be developed using interest-free practice

Kuwait Finance House moves to Turkey for Islamic finance

Kuwait Finance House (KFH) is exploring the possible sale of assets including its Malaysia unit, as the Islamic lender looks for a leaner structure while seeking greener pastures through its Turkey franchise. KFH is restructuring activities ahead of a planned divestment by its largest shareholder, the Kuwait Investment Authority (KIA). The firm has hired Credit Suisse to advise on its options, including the potential sale of a Malaysia unit launched in 2005 that serves as a hub for southeast Asia. KFH did not give further details. A shift away from Malaysia, where KFH holds a valuable licence but lacks scale, would help it focus on Kuveyt Turk, the largest Islamic bank in Turkey with over 500 branches.

Kuwait Finance House mulls Malaysia exit in shift to Turkey

Kuwait Finance House (KFH) is restructuring activities ahead of a planned divestment by its largest shareholder, the Kuwait Investment Authority (KIA). Last week, KFH said it had hired Credit Suisse to advise on its options, including the potential sale of a Malaysia unit launched in 2005 that serves as a hub for southeast Asia. KFH did not give further details. A shift away from Malaysia, where KFH holds a valuable licence but lacks scale, would help it focus on Kuveyt Turk, the largest Islamic bank in Turkey with over 500 branches. Kuveyt Turk, 62 per cent owned by KFH, is in expansion mode: It plans to launch Germany's first full-fledged Islamic bank in July as a gateway to Europe.

SEDCO Holding Group agrees on an acquisition plan for 50% stake in a growing Turkish private school firm

SEDCO Holding Group, a Shariah-compliant private wealth management organization, has acquired a 50% stake in Mektebim Okullari, a company operating in the private education sector in Turkey. Anees Moumina, CEO of SEDCO Holding Group, and Ümit Kalko, Mektebim's founder and Chairman, signed the accord. Under a partnership agreement with the Turkish company which currently operates 17 schools from pre-school to high school levels, SEDCO Holding Group will own 50% of the company's shares and play an active part in the company's growth strategy in the region. The schools currently have over 4,000 students and Mektebim Okullari will add 8 more schools this year to its portfolio and has many other projects under consideration.

Turkey aims at luring foreign investment from Gulf region

The second International Investment Summit held in Istanbul between April 29-30 gathered international investment funds and investors from Qatar, Saudi Arabia, Kuwait and the United Arab Emirates, in total managing about 1.5 trillion dollars of Gulf investment funds. Turkey’s Science, Industry and Technology Minister Fikri I??k stated that Turkey is making huge efforts to facilitate foreign investments over the last decade, both for encouraging them to make joint ventures with the domestic firms and also investing jointly in third countries. Last year, Turkey has attracted about six billion U.S. dollars of foreign direct investment, while the country aims to reach 80 billion U.S. dollars annually.

Good News and Bad News with ‘the Donald Trump of Turkey’

Turkey is a test-tube study in how emerging market (EM) countries reach developed status. As such, it is subject to the interactions between developed and emerging markets, including hot money capital flows, currency wars and the struggles with interest rate policy and inflation. The good news is that the banking system is functioning well and inflation is contained. The bad news is that Turkish financial markets are now subject to many of the adverse trends affecting all EM economies around the world. The central bank is under pressure from politicians to cut interest rates and devalue the Turkish currency to promote exports and tourism.

Bank Asya bonds languish even as control bets lift shares

Speculation that the Turkish government may be closer to relinquishing control of Bank Asya has stoked its stock to a record gain. Bondholders proved harder to please. Shares of the Istanbul-based lender soared more than 50% after it said most Class-A holders provided documentation to the regulator proving they’re qualified to be founding partners. The bank’s Islamic bond climbed about 3% to 61.474 cents on the dollar in the week of April 12. Government control is considered positive for bondholders. The bank’s Islamic bond due March 2023 jumped 38%, the most on record, when Turkey’s agency responsible for resolving failed banks seized control in February as investors bet authorities wouldn’t let the lender default.

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