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Watchdog reaches final accord with Cukurova over banks

HDN | 2/4/2003 12:00:00 AM |

Under the final accord revealed yesterday, the group must sell its majority stake in Yapi Kredi within two years, having lost eligibility to hold a controlling share in a bank after the seizure of Pamukbank. Meanwhile the Savings Deposit Insurance Fund

  • Under the final accord revealed yesterday, the group must sell its majority stake in Yapi Kredi within two years, having lost eligibility to hold a controlling share in a bank after the seizure of Pamukbank. Meanwhile the Savings Deposit Insurance Fund (TMSF) will retain the shareholders' rights in Yapi Kredi except for dividends.
  • Turkey's banking watchdog yesterday said it has finalized a deal with the Cukurova group over its debts with Yapi Kredi and Pamukbank, a move that would smoothen relations with the International Monetary Fund ahead of a critical review of the country's loan deal with the lender.

    Speculations about the deal took to headlines last week, as newspapers criticized the authorities for unethically bailing out Cukurova boss Mehmet Emin Karamehmet, the troubled businessman who was once shown among the richest people on a Forbes magazine list. The Banking Regulation and Supervision Agency (BDDK) faced relentless pressure to disclose details of the deal.

    Under the final accord revealed yesterday, the group must sell its majority stake in Yapi Kredi within two years, having lost eligibility to hold a controlling share in a bank after the seizure of Pamukbank. Meanwhile the Savings Deposit Insurance Fund (TMSF) will retain the shareholders' rights in Yapi Kredi except for dividends.

    If Cukurova has failed to sell the stake by the end of this period, the Savings Deposit Insurance Fund will name an international consultant to carry out a public offering with the aim of selling the entire stake in a year.

    If it's still not sold at the end of the third year, the Fund will complete the sale, BDDK chairman Engin Akcakoca announced yesterday. In this period Yapi Kredi will be managed by professionals named by an independent consultant and approved by TMSF.

    Under the tentative protocol reached last week the group was granted three plus one years to sell its stake in Yapi Kredi, BDDK head added/

    The bank's capital adequacy ratio, Akcakoca said, would not fall to below 10 percent, compared to the 8 percent statutory minimum limit in Turkey. In case Cukurova fails to participate in any capital raise during this period, TMSF will provide the capital and thereby the Cukurova shares in the bank will diminish.

    Some $6.225 billion debts owed by Cukurova to Yapi Kredi, Pamukbank and other banks controlled by the Savings Deposit Insurance Fund will be restructured over a period of 15 years including three years during which the group will only pay interest on the debt.

    Akcakoca said the group's assets were shown as collateral against its debts.

    Under the deal the group will be allowed to buy from Pamukbank shares of Turkey's top mobile carrier Turkcell, so that its debt servicing capacity is improved.

    Pamukbank holds an 8.38 percent share in Turkcell, Yapi Kredi holds another 11.3 percent, Finnish telecom operator Sonera holds 37 percent, Cukurova has 22.6 percent and Murat Vargi 6.2 percent. Some 14 percent of the company is listed on the stock exchange.

    Akcakoca noted that the deal wouldn't put an additional burden on public finances, because an extra funding was out of the question.

    The issue was an outstanding pledge of Turkey under its deal with the IMF and one of the reasons for the delay in the latest $1.6 billion loan tranche.

    Akcakoca dismissed reports that the watchdog accepted advice from the lender on the matter. He added that he didn't face any pressure from the political authority either.

    The Justice and Development (AK) Party government has worried investors and international donors when it said it would interfere with the autonomy of IMF-backed independent regulators. AK Party leader Recep Tayyip Erdogan on Sunday renewed pledges to restrict the independence of the regulators.

    Erdogan pointed to the deal struck between BDDK and Cukurova, adding, "this error has to be corrected and we are working on a solution." He criticized independent regulators for triggering financial crises.

    In response to Erdogan's criticisms, Akcakoca stressed that it was the political authority which caused the recent crises and not BDDK, adding that independence of the banking watchdog was essential.

    Ankara- Turkish Daily News

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