January 3, 2019 / 9:40 AM / 7 months ago

UPDATE 2-Turkish central bank to hold AGM early; former bankers disapprove

(Adds comment from banker, details on borrowings)

By Nevzat Devranoglu and Daren Butler

ANKARA, Jan 3 (Reuters) - Turkey’s central bank will hold its annual general meeting three months early, it said on Thursday, a move former central bankers said was aimed at transferring funds to the treasury before March local elections.

The central bank, which investors see as under pressure from President Tayyip Erdogan to lower rates, normally transfers most of its profits to the treasury, its top shareholder, after its annual general meeting in April.

Concern about the bank’s independence sparked a currency crisis last year that pushed inflation up to more than 20 percent and deepened concern about a slowdown in the broader economy.

The central bank said in a statement it would hold the meeting on Jan. 18 and change its article of association so that the meetings would be held within three months of the end of the annual accounting period. The bank did not say why it was making the change and declined to comment further when contacted by Reuters.

One former central bank governor, now the deputy leader of the opposition Iyi Party, suggested the change was prompted by the government’s need for cash before the March elections.

“This shows how tight their affairs are,” Durmus Yilmaz said on Twitter. “It represents an important example of short-termism in economic polices. The election economy is continuing at full speed.”

‘DAMAGING SITUATION’

The central bank’s annual net profit surged 92.5 percent to 18.38 billion lira ($3.4 billion) in 2017. It transferred some 12 billion lira of that to the treasury. It has not yet released results for 2018. The profit comes from the interest rate banks are charged and from foreign exchange transactions.

Another former central banker said the decision to move up the meeting was taken by politicians and “the fundamental aim is to transfer rapidly the central bank’s profit to the treasury.”

“This is really a seriously damaging situation for a central bank,” Ugur Gurses said on his website. “It is very saddening that they put an institution which prints the national money into the position of a print house printing money for politics.”

The central bank was expected to transfer close to 20 billion lira to the treasury, one treasury desk official at a bank said.

“Bringing the transfer forward at a time when there is an early election has created a question mark in the market,” the banker said.

An early payment to the treasury would coincide with a coming round of debt redemptions. The treasury plans domestic borrowing of 6.1 billion lira in January, against redemptions of 6.4 billion. In February, borrowing will surge to 21.8 billion lira against redemptions of 22.7 billion.

The extraordinary general meeting will be held at 10:30 a.m. (0730 GMT) on Jan. 18, according to the bank’s statement to shareholders on its website.

$1 = 5.4399 liras Writing by Daren Butler; editing by David Dolan, Larry King

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