Turkish President Recep Tayyip Erdogan has already brought the central bank under his control, ousting the governor and installing a successor to drive interest rates lower and try to turbo-charge economic growth. Now he’s making a play for the country’s biggest private lender, Turkiye Is Bankasi AS, as he pushes to unleash credit in the economy. The problem? Isbank is part-owned by the main opposition party, not that that’s likely to get in the Turkish leader’s way.
1. How does a political party own a stake in a bank?
It was bequeathed. The Republican People’s Party, or CHP, received its 28% shareholding in the will of Mustafa Kemal Ataturk — the father of modern Turkey who created the CHP. Ataturk established Isbank in the aftermath of World War I as the country’s first national bank, with the aim of helping the push for infrastructure and financial stability. CHP receives no financial benefit from the shares, since Ataturk’s will stipulated that the dividends go to the Turkish Language Association and Turkish History Association.
2. What’s Erdogan’s complaint?
He contends it’s inappropriate for a political party to hold such a shareholding and to have four seats on the bank’s board. His administration has been mulling a way to transfer the shares to the Treasury since 2015.
3. What do Erdogan’s opponents say?
They see this as another move to assert greater control over the financial system, as well as neuter the opposition. The push for cheaper credit comes as businesses struggle to repay foreign-currency debt following a monumental depreciation of the currency, which saw the lira lose about one-third of its value. State-owned banks have opened the taps in terms of lending, but their commercial peers — eager to keep bad loans under control in a sluggish economy — have been more reticent. A part-nationalized Isbank might come under more pressure to join the campaign.
By: Asli Kandemir
Source: Bloomberg
