Turkish government’s Vakıfbank takeover raises alarm for other banks


Zülfikar Doğan

This week, the Turkish Treasury acquired a controlling stake in the country’s third largest state-owned bank, Vakıf Bank according to a presidential decree published on Wednesday in Turkey’s official gazette.

President Recep Tayyip Erdoğan’s decision will mean the 58.6 percent A and B group shares held by the bank’s directorate will be turned over to the Treasury, under the control of his son-in-law, Treasury and Finance Minister Berat Albayrak.

The decree stated that the A and B group shares were valued at 13.9 billion lira, approximately $2.5 billion.

The remaining shares include group D’s 25.22 percent publicly issued shares as well as group C – the 15.45 percent held by the bank’s pension fund.

The bank’s statement through the Turkish capital market board’s public disclosure platform said the presidential decree did not necessitate a recall of the group C and D shares.

Despite its popular perception as a public bank, Vakıfbank had a special, semi-autonomous status thanks to a history stretching back to Ottoman times in which majority control of its shares was held by the directorate.

Since 15.45 percent of the shares are also held by the pension fund, Vakıfbank employees are also represented in its administration.

But the presidential decree has left the bank ripe for the picking by the Turkey Wealth Fund, the sovereign wealth fund that is fully under Erdoğan and Albayrak’s control. The fund already controls the largest state-owned bank – Ziraat Bank – outright, and has a 51.06 percent stake in Halkbank, the second largest.

But in Vakıfbank’s case, the prospect of a state takeover raises unique ethical questions. Vakıf is a Turkish name for a charitable foundation, and the bank is so-called because it was initially set up in the late Ottoman period to manage the cashflow of these foundations. As such, it is also in control of endowments left by individuals for charitable purposes.

In other words, the takeover of the bank could leave these charitable trusts and legacies in the hands over the government, against the wishes of those who bestowed them.

Besides that, the takeover will place the pension fund and billions of lira amassed from monthly deductions from the bank’s tens of thousands of employees under government control.

The bank’s assets include nearly priceless pieces of real estate across the country, including properties in Istanbul’s Grand Bazaar and Spice Market as well as factories, community facilities, foundation offices and more.

These, too, are to come under Erdoğan’s control according to the decree.

Economic circles in Ankara have compared the Vakıfbank takeover it to the government’s demand for the central bank’s profits and reserve funds earlier this year, when the economy was at a low point and the budget had been stripped bare.

Many believe Vakıfbank’s assets will be used in a similar way to plug the gaps in the budget. The bank’s other assets are a great bonus worth billions of liras, and the government could well choose to sell these off.

Alternatively, the Vakıfbank shares could be sold to Turkey’s close allies in Qatar, or they could be used as collateral to borrow more from international markets.

Meanwhile, Erdoğan has long had his eye on the stake in Turkey’s largest bank, İşbank, that the founder of the Turkish Republic Mustafa Kemal Atatürk bequeathed to the main opposition Republican People’s Party (CHP), which he also founded.

Though the party is only permitted to use its interest in the bank to fund linguistic and cultural institutions, Erdoğan has said political parties should not take part in banking and earlier this year threatened to transfer the shares to the Treasury. Some believe the Vakıfbank takeover could be a prelude to seizing the İşbank shares.



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