Turkey’s Pamukbank is put up for sale

At the root of the two banks’ financial difficulties lies unprofitable lending to other companies in Mr Karamehmet’s Cukurova group.
After withdrawing a legal challenge to the Pamukbank seizure, Mr Karamehmet, who must within two years sell Yapi Kredi after being deemed "unfit to own a bank", has also pledged most of his controlling stake in Turkcell, the country’s leading mobile operator, as collateral for the bank loans.

He is understood to be planning to sell his stake in Turkcell and to use cash flow from the mobile operator until then to help meet his obligations.

Analysts have questioned Mr Karamehmet’s ability to honour a payment schedule which rises sharply in three years time when principal becomes due. Although the World Bank last night described the accord as "a fair deal for both sides", the International Monetary Fund, which has underwritten Turkey’s $40bn bank restructuring drive, has attacked the accord for being too soft on a failed bank owner.
But most analysts also agreed with Engin Akcakoca, the BRSA chairman, when he said that the deal represented the "least-cost solution for the time being".
The alternative would have been for the BRSA to take over Yapi Kredi in its most expensive bailout yet. "This is the best of several bad outcomes," said Murat Koprulu, chief executive of Multilateral Funding International, a New York-based emerging markets investment house. "Taking over Yapi Kredi would have bankrupted the Turkish treasury."
"With this accord, I’m not losing my power to be tough on Karamehmet in future should he fail in his commitments," Mr Akcakoca said in an interview. He was referring to the BRSA’s ability to seize Yapi should it fall below a 10 per cent capital adequacy ratio. The BRSA will also replace the bank’s board and management team.
Mr Akcakoca noted that the dispute with Mr Karamehmet had been complicated by a legal system which was not equipped to deal with urgent business cases. "Time should not result in value loss," he said. He was referring to how the country’s highest court for such disputes had directed the BRSA to return Pamukbank to Mr Karamehmet eight months after declaring it to be insolvent.
He also appealed to Turkey’s politicians to stop damaging attacks on the quasi-independent BRSA, which since its inception two years ago has greatly improved banking supervision.
Mehmet Simsek, economist at Merrill Lynch, urged politicians who were concerned about the injustice of bailing out failed bank owners to eliminate the universal deposit insurance system which encouraged irresponsible banking practices in the first place.