Turkish banking watchdog resigns

ANKARA, Turkey -- The head of Turkey's banking watchdog has resigned following the appointment of an "economic super-minister" to help the country's shattered economy.

Zekeriya Temizel, who headed the Banking Supervisory Board, stood down after Kemal Dervis was appointed to oversee the Treasury, with responsibility for the banking watchdog and other key institutions.

The appointment of World Bank Vice President Dervis follows two weeks of financial turmoil that forced Turkey to abandon its currency peg with the lira plunging as much as 36 percent at one point.

Dervis said he was disappointed by Temizel's decision. "He is known to be an honest person who loves his country. I wish we could have worked together."

But a senior member of his team said Temizel could not accept that the independent institution should now report to a minister.

A public row between the president and prime minister on February 19 sparked the market turmoil that forced Turkey to abandon the currency controls, which lay at the heart of an $11 billion IMF programme.

The ensuing events resulted in the resignations of the central bank governor and treasury under-secretary.

Central Bank Deputy Governor Sureyya Serdengecti was then promoted to governor and Dervis enticed home with power over the treasury and central bank as well as the capital markets board, the banking watchdog, two big state banks and the Turkish Development Bank.

On Saturday, following a meeting with deputy treasury undersecretary Ferhat Emil, Dervis said that stability was essential to be able to boost growth in the crisis-wracked economy.

"For me and for the government the goal is to increase the welfare level of working people, to improve the distribution of income, and to provide growth."

He also said he would like to see some of the zeros from the currency, which currently trades at nearly 1,000,000 to the dollar, erased.

"Hopefully we will erase these zeros and get rid of this quadrillion level," he said, adding there were no immediate plans for such a move.

Turkish newspapers generally welcomed Dervis' appointment, but many warned that tensions remained over economic responsibility in the government.

"Economic administration is divided into as many sections as there are parties in the coalition," said newspaper columnist Mustafa Balbay.

Prime Minister Bulent Ecevit's coalition partners resisted pressure to also hand the key planning and privatisation portfolios over to Dervis.

The lira held up against the dollar on Friday amid hopes Dervis would improve Turkey's prospects.

The central bank fixing put the lira at 903,721/908,080 to the dollar, compared to 915,708/920,125 on Thursday. Stocks also ended up 1 percent.

The stock market will be closed all next week for the religious holiday of Eid Al-adha, the Feast of the Sacrifice, but bond and money markets will open on Friday, March 9.

Turkish officials will work throughout the week on new economic measures to replace the three-year IMF disinflation programme wrecked by the collapse of the currency peg.

Ecevit said on Wednesday he was hoping for a multi-billion dollar loan to help weather the crisis, but there was no indication from the IMF or other international lenders that such a large loan would be forthcoming.

Reuters contributed to this report.

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