Turkish banking watchdog under fire for loan permit

ISTANBUL - Radikal

The BDDK law bans banks from providing loans to companies in which any executives of those banks that have authority to provide loan, have a stake of over 25 percent. DAILY NEWS photo, Emrah GÜREL

Turkey’s banking watchdog (BDDK) has come under fire as it reportedly gave permission to a senior executive of a bank to take loans to use in a company which he was “indirectly” in partnership with, according to daily Radikal.

The banking law, however, bans banks from providing loans to companies in which any partner, board member, general manager, deputy managers and other executives of those banks who have authority to provide loans, and/or their spouses and children, have a stake of over 25 percent by themselves or together.

Wall Street Journal Turkey reported in July that a businessman who was a board member of a bank in Turkey had taken loans from the bank for an energy company in which he had a stake of over 30 percent.

The BDDK then announced in August that such loans could be provided if these partnerships were “indirect.”

The 50th Article of the Banking Watchdog, however, states the following: “Banks cannot provide loans by any means to the companies in which any partner, board member, general manager, deputy managers and other executives of those banks who have authority to provide loans, and/or their spouses and children, have a stake of over 25 percent by themselves or together.”

This article has been of great importance in Turkey’s new banking regulations following the banking crisis in 2001.

The BDDK said on the evening of Dec. 9 in a written statement that, since the article did not include any clause referring to “direct” or “indirect” partnership, there was no problem with banks’ action in providing loans to the companies in which any partner, board member, general manager, deputy managers and other executives of those banks who had the authority to provide loans, and/or their spouses and children, had an “indirect” stake of over 25 percent by themselves or together.

“The BDDK did not give particular permission or approval to anyone,” read the statement.

“Many banking representatives were fined in the past for enabling their own companies to provide loans from their banks. It is very sad to see the banking watchdog acting like this even when the country still has not been able to overcome the negative effects of the 2001 crisis. What if these banking representatives ask for some re-assessment of their fines? The banking watchdog unfortunately appears to be removed from the real spirit and basis of the law,” Radikal columnist Uğur Gürses said in a piece published yesterday.