Ousting of Turkish bank staff sparks political interference fears

At just 51 years old, Fuat Erbil, the general manager at Garanti BBVA, Turkey’s fourth largest bank and its biggest consumer lender, made the surprise decision to step down and retire on August 19. His replacement, Recep Baştuğ, took over as general manager on September 1.

The sudden change has signalled the start of hectic days for the bank, and immediately sparked rumours that Erbil’s decision to retire was encouraged by the Turkish government.

In fact, a common claim goes, it was none other than the president’s son-in-law, Treasury and Finance Minister Berat Albayrak, who sought the removal of Erbil.

It is not possible to verify the rumours, though it is worth noting that it is not the first time a similar resignation has been attributed to Albayrak’s influence.

The minister was said to have been behind a wave of resignations at Turkey’s largest bank, İşbank, in late March, when board chairman Ersin Özince and three other board members stepped down.

Özince was appointed as the chairman of the bank’s board in 2011, after he stepped down as head of the Banks Association of Turkey and sought to retire from the general manager’s role at İşbank following a separate spat with Turkey’s Justice and Development Party (AKP) government.

Before Özince’s resignation in March, İşbank had become the first bank to defy the government’s commands and raise interest rates on loans.

The former board chairman was also noted for his strident opposition to President Recep Tayyip Erdoğan’s insistent demands to turn over to the treasury the 28 percent stake in the bank that Turkish Republic founder Mustafa Kemal Atatürk bequeathed to the secularist main opposition Republican People’s Party.

These disagreements with the government have been cited by economic circles as the reason Özince had to step down from the head of a $75 billion financial empire.

Özince appears to have been the tip of the iceberg when it comes to government interference in bank administrations. There have been dozens of changes in the top levels of Turkey’s largest banks over the last year.

Similarly, Garanti BBVA’s Erbil is said to have been forced out after refusing to comply with the government’s economic policies.

Erbil is one of the brightest of the figures who remained at the bank from the staff assembled by its previous owner, Doğuş Group. He helped the bank become the most popular among consumers while working as an assistant general manager.

This success must have impressed BBVA, the Spanish bank that became a key shareholder with shares acquired from Doğuş Group. Erbil was elevated to the top executive position in 2015, against stiff competition from more experienced candidates.

The new chairman, Recep Baştuğ, like Erbil has a career history working for Garanti. But he has one important difference: Baştuğ spent a spell beginning in February 2018 as a board member at Ciner Group, a conglomerate known for its close links to the AKP government.

Ciner Group’s main business interests are in mining, a field where good relations with the government and Ankara bureaucracy are essential, and its owner, Turgay Ciner, has cultivated and used those links to massively boost his fortunes.

Baştuğ’s links in Ankara developed while at Ciner Group are said to have been a main reason for his selection to replace Erbil, which the government is believed to directly support.

The reasons for that support may be explained by his performance at Ciner Group. Last year, a currency crisis struck Turkey, dragging the lira’s value to a low of 7.2 against the dollar.

As the lira threatened to spin even further out of control, Baştuğ arrived out of nowhere with a cash injection of $1.6 billion in credit to be used entirely in Turkey secured by a Ciner-owned company from banks in England.

In fact, this was not a simple loan at all, but an operation that involved Ciner Group establishing a company in London and using the group’s Turkish assets as security for the loan.

But the large loan came at a crucial time for the government, which along with its large media contingent trumpeted it as a sign of foreign investors’ trust in Turkey. 

This has likely won the new Garanti chief Ankara’s confidence that he will act in accordance with the government’s policies.

Industry insiders, however, are still in a state of shock at the apparent government interference in Garanti and İşbank, Turkey’s two largest private banks, a retired banker told Ahval.

Moreover, the government interference appears to have become pervasive at all levels of the banking sector.

“Relations between banks and politicians have always been turbulent, but generally politicians would never interfere with the professionals working at the banks,” the banker said.

“Now, let alone board members and general managers, we’re hearing that even assistant general managers and workers at lower levels who make critical comments (about government policies) on television are subject to sanction from the government,” said the retired banker.

Figures show that this interference has reached a peak since Albayrak was appointed as minister in July 2018.

The Banks Association of Turkey’s website shows that, in the last year in the main sectors of the industry, 80 directors at 27 banks have changed positions. Of those 80, six were board chairpersons, 34 were board members, two were general managers and 38 were assistant general managers.

In a conservative and highly specialised sector like banking, the pace of change reflected in those figures should not be underestimated.

Half of the high-level staff changes took place in the 10 big banks that make up 80 percent of the banking system. It is also striking that foreign banks active in markets like bonds, foreign exchange and stocks that are seen as battlegrounds by the AKP have been subject to a wave of high-ranking staff changes.

There are, moreover, concrete examples of the AKP’s interference in the upper echelons of the banking sector, like the case of former Akbank assistant general manager Kerim Rota, whose ordeal caused a stir on Turkish social media last year.

Rota accepted a job offer as Odeabank’s general manager and resigned from his position at Akbank to take the job. Yet before he could start at his new position, Turkey’s Banking Regulation and Supervision Agency (BDDK), which has the power to reject high-level postings, denied Rota permission to join Odeabank.

The BDDK had not raised any objections to the posting until the last minute, and did not give any justification for its intervention. To make matters worse, it also refused him permission to return to Akbank.

The reasons for damaging the young banker’s career are still not clear, but a source with knowledge of the incident said Rota had drawn the government’s ire while he was in charge of the bank’s bond and foreign exchange departments. The same source recalled that, during the currency crisis when the AKP was blaming currency fluctuations on what it called speculative attacks, the Turkish pro-government media labelled Akbank as a “collaborator” with the attackers.

Thus, Rota was instantly profiled and marked out as an undesirable individual by Ankara.

There are many more similar examples, as is shown by the record number of high-level staff changes over the past year at international banks like Citibank and Deutsche Bank, which the government had blamed for Turkey’s faltering markets.

Then there is the case of HSBC, which despite being labelled as a bank that had engaged in “manipulation” by pro-government media, had escaped the high-level staff changes.

But there was a potentially even more serious incident, in which HSBC’s general manager, Selim Kervancı, was threatened with a prison sentence late last year, when he was investigated for insulting President Erdoğan in posts from his personal Twitter account during anti-government protests in 2013.

Kervancı was acquitted and returned to the post. But that incident remains as a stark message to bankers of the risks they could run by stepping out of line.