Is Erdoğan’s ‘taka’ headed for the cliffs?

Not according to credit ratings agency Standard & Poor’s. In a note released on Feb. 6, S&P said the “banking regulator’s (BDDK) decision to transfer the management of Bank Asya to the Savings Deposit Insurance Fund (TMSF) does not affect the unsolicited credit ratings on Turkey.”

At first look, this makes sense. After all, S&P notes that “Bank Asya’s relatively small size (roughly 0.1 percent of banking sector assets) makes it rather unlikely that there could be any contagion effects.” Despite some recent increase in non-performing loans, the rest of the banking sector is in good health.

But I would argue that such an approach is missing the forest for the trees. To explain myself, let me pose a simple question: Why was Turkey hit with the 2001 crisis? You may tell me it was because of the banking sector. Or that it was a political matter, triggered by the row between the president and the prime minister of the time.

Both explanations are incomplete. I would argue that at the heart of it, the crisis was a consequence of politicians meddling with the economy and markets. Kemal Derviş, the World Bank executive brought in to save the economy, knew this well. That’s why he made the independence of the Central Bank and regulatory institutions one of the key pillars of his economic recovery program.

Although he reaped the benefits with economic stability and increased voter support early on, President Recep Tayyip Erdoğan has nevertheless been trying to get rid of these independent institutions for a while. He has been largely successful, replacing civil servants with subjects, with the exception of the Central Bank – he recently bemoaned the Bank’s independence.

As for the Bank Asya takeover, while government officials maintain it was legal and judicial, columnist Uğur Gürses pointed to three major contradictions in the operation, which suggest that the decision of the BDDK, urged to act on Bank Asya by Erdoğan back in September, was political. By the way, my questions to them on investment bank Aktif’s foray into retail banking were never answered.

The TMSF does not fare any better. In 2008, it sold a media group to Çalık, a conglomerate headed by Erdoğan’s son-in-law at the time that is also Aktif’s parent – a sale that was partly financed by two state banks. More recently, it appointed a former AKP deputy to head daily Akşam in 2013, not to mention the asset freeze against the opposition Republican People’s Party’s (CHP) Istanbul mayoral candidate for an unpaid loan from 1998 right before the elections.

S&P is therefore wrong in viewing the Bank Asya decision “as an isolated incident and not a determined politicization of Turkey’s institutions.” And I am not the lone wolf on this one: Cansen Başaran Symes, the new head of the Turkish Industry and Business Association (TÜSİAD), urged the continuation of institutions’ independence on Feb. 6, shortly before the credit ratings agency’s note came out.

The Bank Asya takeover will not ruin the Turkish economy. It won’t cause a tiny bit of stress in the banking sector either, just like a piece of ice crushed after hitting the Titanic a few hours before the fateful collision. However, it is obvious where the “taka” (a small sailing boat specific to the eastern Black Sea region of Turkey) is headed.