2Nd Public Lender To Set Up Islamic Bank

A second state-run lender in Turkey could soon be allowed to establish what would be the sixth Islamic bank in the country, according to proposed legislation submitted to Parliament.

The government sent Parliament a draft for a change in laws regulating the Turkish banking sector on Monday. The anticipated changes would involve plans to allow public bank Vakıfbank to set up the country's second public Islamic lender, after Ziraat Bankası. Ziraat received regulatory approval from the Banking Regulation and Supervision Agency (BDDK) last week to establish an Islamic bank. The moves are part of government efforts to develop the Islamic banking sector at home.

Ziraat, the country's largest state-run bank and its second largest in terms of assets, will be allowed to set up a standalone Islamic unit with $300 million in capital, the regulator said late on Wednesday. Meanwhile, Turkish media speculated on Monday that, Emlak Bank, a lender that was transferred to Ziraat Bankası during Turkey's 2001 domestic financial crisis, would be reactivated as part of the Islamic bank plans. Emlak Bank, established in 1926, failed in 2001 and has since been in liquidation, with its operations being carried out under Ziraat.

There are currently four Islamic banks operating in Turkey, which hold a combined 5 percent share of total banking assets: Albaraka Türk, Bank Asya, Türkiye Finans and Kuveyt Türk, a unit of Kuwait Finance House.

Islamic finance has developed slowly in Turkey, the world's eighth most populous Muslim nation, partly because of political sensitivities and the secular nature of its laws. This changed in 2012, when the Turkish government issued its debut $1.5 billion Islamic bond and launched regulatory moves to allow wider use of Islamic finance contracts. The government has since issued dollar and lira-denominated Islamic bonds and is finalizing plans for another deal.

(Cihan/Today's Zaman)