Turkish President Recep Tayyip Erdogan on Monday reportedly approved plans for Ankara’s Treasury to take a 28 percent stake in Isbank, the country’s largest publicly listed lender. Turkey’s protracted economic downturn and the growing public reaction to mounting Turkish casualties in Syria have prompted Erdogan’s desperate attempt to change the news cycle with a daring takeover plan – an effort likely to exacerbate the country’s political and economic crisis.
Over the last two years, Erdogan made two failed attempts to take over Isbank. In September 2018, he called for an investigation into the status of four Isbank board members appointed by the Republican People’s Party (CHP), the country’s pro-secular main opposition in parliament. A month later, Erdogan first floated the idea of transferring Isbank shares to the Treasury – a threat he repeated in February 2019. Following both threats, the lender’s shares fell 6 percent. Yesterday, after news emerged of Erdogan’s latest attempt, Isbank shares fell by almost 3 percent.
The Turkish president’s motivations for targeting Isbank, and, by extension, Turkey’s pro-secular forces, are as much ideological as economic. Mustafa Kemal Ataturk, the founder of both the Turkish Republic and the CHP, established the bank in 1924. In his 1938 will, he bequeathed his shares to the party and allocated the dividends to the Turkish Linguistic Society and the Turkish Historical Society, two institutions central to his secular republican nation-building project. Long before Erdogan’s ascent, two short-lived attempts to take over the bank, first by a government led by CHP’s rivals in 1953 and then by a military junta in 1981, failed as courts ultimately overturned these partisan expropriation attempts.
Challenging Isbank and the CHP is part of Turkish Islamists,’ and therefore Erdogan’s, lifelong struggle to undermine the legacy of Turkey’s founding father and his secularizing institutions and reforms. Hence, a leading columnist for Turkey’s radical Islamist daily Yeni Akit rushed to endorse Erdogan’s plans on Thursday, going so far as to recommend the transfer of Isbank’s shares to Turkey’s Directorate of Religious Affairs.
Isbank’s tradition of good governance and strong economic performance has posed an embarrassing challenge to Turkey’s Islamist government, since it puts to shame Turkey’s sluggish public lenders, which struggle under the misguided management of Erdogan and his son-in-law, Berat Albayrak, who has been serving as the minister of finance and treasury since July 2018. On their watch, as one of the leading Turkish economists warns, the country’s risk premium has been “the highest by far among emerging economies,” as Turkey remains “the riskiest country among emerging economies.”
This poor management is also driving away foreign investors. UniCredit, Italy’s biggest bank by assets, launched the sale earlier this month of a 12 percent stake in Turkey’s third-largest bank, Yapi Kredi. Meanwhile the world’s seventh-largest lender, HSBC, is reportedly considering selling its Turkish business “amid concerns about the country’s volatile currency and economic outlook.”
With his threats against Isbank, Erdogan can succeed in manipulating the Turkish news cycle for a few more days, thereby buying himself some respite from embarrassing reports on the deepening crises in the economy and in Syria. However, both Erdogan and Turkey would fare better if the Turkish president could keep his hands off the country’s largest listed lender and start addressing the fallout from his and his son-in-law’s misguided economic and foreign policies.
Aykan Erdemir is a former member of the Turkish parliament and the senior director of the Turkey Program at the Foundation for Defense of Democracies (FDD), where he also contributes to FDD’s Center on Economic and Financial Power (CEFP). For more analysis from Aykan and CEFP, please subscribe HERE. Follow him on Twitter @aykan_erdemir. Follow FDD on Twitter @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.