(Bloomberg) -- In the wake of World War I, Mustafa Kemal Ataturk set out to create a central bank that would steer his new Turkish Republic through the wreckage of the Ottoman Empire and end its dependence on London and Paris. He implored people to invest and thousands did, many with their life savings.
It was a great bet, at least on paper -- the bank is now the most profitable joint-stock company in Turkey, earning $5.6 billion last year alone. But the Treasury took the lion’s share, leaving the 6,000 or so individuals who own a combined 14 percent stake just $140 to divvy up.
Descendants of those seed investors consider such a pittance an insult to the families who heeded Ataturk’s call for sacrifice during the depths of the Great Depression. They’re demanding the state lift its dividend cap on grounds both moral and economic. The issue is so emotional that while several other central bank’s have private owners, Turkey’s may be alone in making them weep.
“This is an issue of honor,” a graying man named Alpay Baydar said at the bank’s annual meeting in a packed hall in Ankara, choking back tears. “The Treasury has no right to take away what belongs to us.”
Unlike Switzerland and a few other countries where the central bank is publicly traded, Turkey has no market for these stocks, making them practically worthless. An elder woman who identified herself as Jale Yazicioglu was dumbfounded at how it was possible to lose money in a company that prints it.
“My father bought 42 shares of your bank in 1931 and deposited 4,200 liras,” Yazicioglu told Treasury and bank officials at the April meeting. “I ask you to please calculate the current value of my stocks.”
She said a hundred liras was a lot for a single share back then, equal to 100 Resads, gold coins named after the sultan who minted them. Had her father left her 4,200 Resads instead of 42 shares, she’d be worth more than $1 million. Instead, she has to stand in line for hours just to receive “pennies.”
When the bank was founded in 1930, the government directly owned just 15 percent, a stake that was raised incrementally over decades to the current 55 percent. Its Type A shares don’t confer exceptional status, but the bank is obliged by charter to send the Treasury whatever remains after taxes, dividends and contributions to its primary reserves.
Greece, by contrast, holds less than 10 percent of its central bank. South Africa’s bank has more than 600 owners and Switzerland’s, which was founded in 1907, is almost half-owned by private owners with limited voting rights.
But few monetary authorities were created at such a pivotal point in their national history. After the empire’s defeat in the Great War, parliament ousted Sultan Mehmed VI, paving the way for Ataturk to become president in 1923. The new leader was eager to replace the central bank that the British and French were operating, but it took seven years to lure enough domestic savings to do so. An ad campaign of Ataturk posters declared it a “duty” to buy shares.
“Accumulating capital was the main challenge,” said Murat Koralturk, assistant professor of economic history at Marmara University in Istanbul. “The young republic’s concern about foreign pressures and desire to set up a state bank to guard the national interest were the most powerful drivers in the process.”
Even during the bank’s growing pains, though, the state was more generous with foreign investors than its own. Needing gold to back the lira, Ataturk turned to Ivar Kreuger, the legendary Swedish tycoon known as the “Match King.” Documents in parliament show that Kreuger’s New York-based International Match Corp. loaned Turkey $10 million to buy bullion in exchange for a 25-year monopoly on match production.
Such concessions still irritate Adnan Bahar, a central bank shareholder who runs a brokerage in Istanbul. The Ankara meeting was his 38th since 1976, when his father acquired stocks in a private transaction.
“My father died, I’m dying and I’m afraid my children will also pass away before we take what is our right,” Bahar barked. “My dividends won’t even cover my trip to Ankara. Please don’t make us come here every year.”
As the mood turned angrier, Erdem Basci, who stepped down as the bank’s governor a week later, grew visibly distraught. “I really want this to be resolved,” Basci said. “I feel sorry about this.”
Neither the central bank nor the ruling AKP party responded to requests for comment on the bank’s dividend policy.
But not everyone was vexed.
Selahattin Erguden, who introduced himself as a lawyer, said his fellow stakeholders were missing the original point of public ownership -- oversight.
“You think I wouldn’t want some of the profit?” Erguden asked the audience. “This is the state’s way of asking us to come and hold it to account. It wasn’t meant to give us a share of the bank’s income.” Hakki Sulak, who inherited shares in 2011, has little patience for this argument. He’s one of an increasing number of owners who say they’ll turn to the courts if the issue isn’t resolved.
“Our dividend this year was just over a cent,” Sulak said from Istanbul. “I’ll be able to buy a bottle of water with my share of the profits in 83 years -- assuming the price of water doesn’t change.”
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