By Ebru Tuncay
ISTANBUL (Reuters) - President Tayyip Erdogan denied on Thursday the existence of any concerted effort in Turkey to sink one of its banks, days after lender Bank Asya (IS:ASYAB) said it had been the target of a systematic campaign to undermine it.
The Islamic lender, with more than a million deposit-holding customers and 280 branches, is caught at the centre of a power struggle between Erdogan and Fethullah Gulen, an Islamic cleric whose sympathisers founded the bank.
Bank Asya Chief Executive Ahmet Beyaz said this week the bank was healthy and vowed to see off what he said was a "smear campaign". The bank, he said, was meeting all its obligations.
He suggested that attacks on his bank could sour foreign investors' view of Turkey.
But Erdogan told business group TUSIAD at a conference in Istanbul:
"It's being said that there are efforts being made to sink a bank. There is no work being done to sink a bank. This bank has already failed. But they are trying to keep it afloat with a few buckets of water.
"Shall we repeat past mistakes and keep alive such a failed financial institution?" he said, referring to Turkey's previous banking crises.
He did not mention Bank Asya by name.
SHARES FALL FURTHER
Pro-government newspapers have carried almost daily reports on Bank Asya's woes, portraying it as a failing bank being propped up by members of Gulen's network.
Erdogan accuses Gulen, who is based in the United States, of seeking to overthrow him and has pledged to continue purging institutions such as the police and judiciary, where Gulen is believed to wield influence, of his supporters.
Gulen denies such accusations.
Bank Asya's profits and deposits tumbled in the six months since December, when the rift between Erdogan and Gulen burst into the open with a government graft scandal which Erdogan, then prime minister, said was concocted by the cleric's supporters.
The government cancelled tax collection and social security payment contracts with Bank Asya last month.
Local media reports say state-owned firms and institutional depositors loyal to Erdogan withdrew 4 billion lira (1.10 billion pounds), or some 20 percent of the bank's total deposits, earlier in the year, although Bank Asya has not commented on these figures.
Bank Asya shares have fallen 43 percent this week since resuming trading following a suspension on Aug. 7 due to uncertainty about its future. The stock slid a further 11 percent after the market opened on Thursday, but later reversed those losses to trade up 11 percent at 0.71 lira (0.19 pounds).
(Reporting by Ebru Tuncay and Ayla Jean Yackley; Writing by Nick Tattersall; editing by Ralph Boulton)