Today’s analysis is a summary of a larger report due to be released by Shadow Governance Intel, and available in the Report Store, on Monday the 12th of February. The report dissects political exposure in Turkey’s banking sector.

The banking sector has been historically linked to political power; a trend most evident through the case of Türkbank in 1998, when the government of then Prime Minister Mesut Yılmaz collapsed after allegations of corruption surrounding the bank’s privatisation process.

The monopolisation of power in the hands of the Justice and Development Party (AKP) and President Recep Tayyip Erdoğan since 2002 have made the AKP a unique phenomenon in Turkish political history. Their influence has brought new nuances to the ways that Turkey’s banking sector is politically exposed, which several high-profile cases appear to demonstrate.

In particular, the Turkish banking sector has followed AKP government guidelines, which places several banks under higher levels of political exposure than others. This plays out via awarding loans to entities for large construction projects that have little feasibility of completion as well as through connections between certain individuals within the Turkish banking sector, the government in Ankara, and other illicit networks.

Impact

  • The AKP’s political hegemony has enabled it to exert influence – formally and informally – over decision-making in some of the country’s key banking institutions.
  • Political polarisation in Turkey is playing out in the banking sector, mirroring current political dynamics. This is most obvious with banks viewed as part of the “opposition”, several of which have fallen prey to seizure from the authorities, or threatened by the government through informal mechanisms of influence.
  • The political isolationism of Turkey can be reflected in some of the main “mega-infrastructure” projects led by the government, which ultimately relies on funding provided by banks that are loyal to the ruling elite, or controlled by them.