The embroiled financial institution Bank Asya sank further on the Istanbul Stock Exchange yesterday amid fears that it would be unable to meet its obligations to account holders. The bank, which is known to have close ties to the Gülen Movement, announced that it would increase its capital base by 25 percent while the stock sank 10 percent in both sessions of the Istanbul Stock Exchange, bringing it down 19 percent for the day, closing at TL 0.80.
The bank refused to disclose whether or not current shareholders would be putting up the needed capital and in an environment of a plummeting stock price, attracting new investors will be near impossible. The application to increase the capital base through a rights issue may hit a roadblock if the Capital Markets Board of Turkey believes the stock will not be stable enough to protect the interests of individual shareholders.
Regulators may fear a run on the bank and ultimately insolvency. Asked what the future holds for the bank, the Deputy Prime Minister Ali Babacan and the Finance Minister Mehmet Şimşek noted that the Banking Regulation and Supervision Agency (BDDK) was looking into the bank and would halt its operations if necessary under the laws.
The current market capitalization of Bank Asya stands at TL 720 million ($325 million), it had been worth over TL 2 billion in 2013, but the value has precipitously dropped on reports that investors are pulling out of the bank.
What's next for the bank? Should the shares of the bank continue to drop as they have in the past 48 hours, the bank will have lost nearly TL 300 million from its market capitalization by the end of the week. At some point the Capital Markets Board may intervene and again halt the trading of the stock should it continue to dive. Another halt to trading of the stock may spell the end for the bank as the rights issue would then most likely be suspended at which point the company would be forced to re-examine the future and potentially how to wind down operations.
Turkish Prime Minister Ahmet Davutoğlu has announced that banking regulator BDDK is the authority to decide whether financial institutions are violating banking laws. "If any bank, without excepting Bank Asya, is in a situation which is contrary to the provisions of law and the banking system, it is the duty of our state institutions, particularly the BDDK, to evaluate this," Davutoğlu told reporters on Tuesday at Esenboga Airport in Ankara prior to his departure for an official visit to the Turkish Republic of Northern Cyprus. Davutoğlu said people should disregard manipulative and deceptive media reports regarding banks.
On Aug. 7, Turkey's main stock exchange Borsa Istanbul placed a ban on trading Bank Asya's shares due to ambiguities in the ownership of the bank. The ban was lifted on Monday, and trading of Bank Asya shares resumed. Bank Asya shares saw the largest drop since it began trading in 2006.
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