Turkey’s banking watchdog chief submits resignation amid investment fund scandal

Şahap Kavcıoğlu, the head of Turkey’s banking regulator, said Wednesday he had submitted his resignation to President Recep Tayyip Erdoğan following allegations, which he denied, linking himself and his agency to the country’s investment fund scandal.

The scandal concerns suspected stock market manipulation involving investment funds that attracted nearly half a million investors. The crisis erupted in September when some funds could not meet withdrawal requests, prompting regulators to order the liquidation of 131 funds managed by seven asset management companies.

Kavcıoğlu’s announcement followed the arrest pending trial of three senior officials at the Banking Regulation and Supervision Agency (BDDK), as the investigation increasingly reaches officials responsible for overseeing Turkey’s financial system.

“In light of recent allegations concerning the Banking Regulation and Supervision Agency and myself, I have asked our president, Recep Tayyip Erdoğan, to relieve me of my duties so that our institution does not suffer further damage,” Kavcıoğlu said on X.

 

He also thanked Erdoğan for entrusting him with his previous positions. His statement did not say whether Erdoğan had accepted his resignation.

Economist Timothy Ash questioned Kavcıoğlu’s qualifications for the role in a post quoting his resignation announcement on X.

“I can never understand people taking jobs that they are not qualified to do. It would be my own nightmare. How can you sleep at night?” Ash wrote.

An İstanbul court on Monday jailed BDDK deputy chief Muhammet Erişen pending trial, along with Adil Katılım Bankası CEO Murat Yönaç. BDDK department heads Bilal Soysal and Mustafa Alper Taş have also been jailed in the investigation, according to Turkish media reports.

The funds had accumulated more than $20 billion in assets in just three years, attracting investors including politicians, former officials and celebrities, Reuters reported. Investors sought high returns to protect their savings against persistent inflation and a weakening lira.

Investigators suspect funds were used to inflate share prices, raising the apparent value of their holdings and misleading investors. The Capital Markets Board (SPK), Turkey’s securities regulator, oversees investment funds and securities markets, while the BDDK regulates banks and certain other financial institutions.

In an interview with journalist İsmail Saymaz published by the Sözcü newspaper earlier Wednesday, Kavcıoğlu denied taking bribes or having money invested in funds under investigation. He also denied allegations linking the BDDK to the crisis.

“It has nothing whatsoever to do with the fund business,” he said of the agency.

Kavcıoğlu said neither he nor his family or anyone associated with him had investments in funds or the stock market. Asked whether investigators might have questioned his colleagues about him, he said he had received no such information.

Kavcıoğlu has faced public accusations from Savcı Sayan, a politician from Erdoğan’s ruling Justice and Development Party (AKP) and former mayor of the eastern city of Ağrı.

Sayan questioned whether Kavcıoğlu had sought 20 billion lira ($398 million) from Tera investment group chairman Emre Tezmen to rescue Pusula Holding and housing finance company Katılımevim, in exchange for arranging 35 billion lira ($697 million) in credit through Takasbank, Turkey’s securities clearing and settlement bank.

Tera and Pusula are among the investment groups at the center of the scandal. Tera accounts for most of the assets in the funds being liquidated, making it central to efforts to repay investors.

The BDDK denied the allegations in an October 30 statement, saying they lacked any legal or factual basis and announcing legal action.

Kavcıoğlu also rejected the alleged arrangement in his Sözcü interview and said he had filed a criminal complaint against Sayan.

He acknowledged meeting with Tezmen and Pusula chairman Serdar Turhan, saying the talks concerned managing problems at businesses under his agency’s supervision. Both businessmen were jailed pending trial in September as part of the fund investigation.

Justice Minister Akın Gürlek said November 3 that investigators had identified an alleged criminal organization extending into the senior financial bureaucracy, accusing participants of using bribery to undermine oversight.

By November 9 the investigation had spread to 464 suspects, including 120 in pretrial detention, Gürlek told a parliamentary budget committee. Assets and bank accounts belonging to 386 people and 116 organizations had been frozen, he said.

The number jailed pending trial rose to 123 on Wednesday after a court ordered the detention of former Takasbank chief Yunus Arıncı and two other financial executives.

Kavcıoğlu’s announcement follows the October 19 resignation of SPK chairman Mahmut Sütçü, who cited health concerns. Erdoğan subsequently removed him from office through a decree published the following day. Prosecutors had also received authorization to investigate Sütçü’s predecessor, İbrahim Ömer Gönül, over alleged failures to fulfill his responsibilities.

Deputy Treasury and Finance Minister Osman Çelik also requested retirement in October after his son-in-law, İskender Balcı, was jailed pending trial in a related stock manipulation investigation. Neither Çelik’s retirement request nor Sütçü’s departure was officially attributed to the scandal.

Authorities have begun recovering money from investors who profited from transactions under scrutiny and making payments to affected fund holders. Treasury and Finance Minister Mehmet Şimşek said in October that repayments would come from fund assets and recovered money rather than the Treasury.

Kavcıoğlu served as central bank governor from March 2021 until June 2023, when Erdoğan appointed him to lead the banking watchdog.