The fund crisis and financial-market scandal that has emerged in Türkiye cannot be explained simply by a few managers taking excessive risks or investors making poor choices. The structure is too large for that.
To understand how it was able to grow, we need to look at the institutional order surrounding the flow of money. A fund is established. It receives approval. It buys assets, influences prices and uses custody and brokerage services. At every stage, it is supposed to be supervised.
That was the logic behind Türkiye's effort to strengthen independent regulatory institutions after the 2001 crisis. In banking, capital markets, monetary policy, energy and communications, the aim was to build a rules-based system kept, at least to some degree, away from day-to-day political decisions.
The purpose was not simply to keep markets functioning.
It was to prevent the cost of market failure from being passed on to society as a whole.
Economics has a term for what can happen when that system breaks down: regulatory capture. It describes the process by which institutions created to protect the public interest gradually come under the influence of the economic or political interests they are supposed to regulate.
This does not require open intervention. Appointments, political influence, control over information flows, movement of personnel, conflicts of interest and delayed enforcement can produce the same result.
The International Monetary Fund's work on financial regulation has examined this mechanism. As the financial sector's political influence grows, support for tighter rules and tougher enforcement can weaken. Lighter supervision encourages more risk-taking, while the cost eventually moves into the real economy.
The institution is still there.
Its decisions are still published.
But if the timing, scope and severity of supervision have changed, formal independence begins to mean much less.
Türkiye's standing in the 2026 Index of Economic Freedom also points to weaknesses in this institutional environment. With a score of 55, Türkiye ranks 117th among 184 economies and 42nd among 44 countries in Europe. Its scores for government integrity and judicial effectiveness are also low.
These figures are not evidence of the fund crisis. But as an outside snapshot of the institutional environment in which the crisis has developed, they are hardly reassuring.
There is a deeper complication.
The positions and responsibilities of decision-makers across regulatory institutions have moved closer together. The state is at once the owner of large financial assets, a powerful shareholder in market infrastructure and the center from which appointments to regulatory authorities are made. A rigid institutional homogeneity has begun to take shape.
Practices in the communications sphere raise a similar question. The slowing of social-media platforms and restrictions on accounts and news content show how regulatory power can directly affect the space for public expression. The blocking of numerous accounts posting about finance and capital markets during the fund crisis therefore deserves particular attention.
None of this, by itself, proves wrongdoing.
But when market participation, public ownership, regulation and political decision-making converge within the same network, the distance between the regulator and the regulated becomes harder to see.
And that leads directly to the questions now troubling the public.
There are three basic possibilities.
If regulators saw the risk too late, there was a serious failure of supervision.
If some actors benefited from weaker oversight because of political or bureaucratic connections, then regulatory capture becomes a legitimate subject of inquiry.
If funds, companies, financial intermediaries, political connections and parts of the supervisory machinery gradually became components of a structure that sustained itself, the problem is more serious.
At that point, the issue is no longer the failure of one regulator or another.
It is the weakening, or capture, of regulatory institutions through a network.
There is no legal basis today for claiming that this final possibility has been proved. But the scale of what has emerged, the relationships around it and the timing of the intervention make it impossible to dismiss.
Who was allowed to move forward?
Who failed to see what was happening?
Who saw it and remained silent?
Why did intervention come so late?
The conclusion can be stated simply.
If a structure this large grew through a series of accidents, Türkiye has suffered a profound supervisory failure.
If it did not grow by accident, the problem is much deeper.
A serious investigation therefore cannot stop at tracing the movement of money. It has to examine the chain of approvals, the chain of supervision, the chain of silence and the chain of delayed intervention. That matters not only for understanding this crisis, but for preventing the next one before the damage spreads.
The job of a regulatory institution does not end with ordering liquidations after a crisis has erupted. Its real task is to protect social welfare before the crisis takes hold.
So the questions are straightforward.
Did the institutions responsible for supervision do their job?
And who was watching them?
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This article by Prof. Dr. Veysel Ulusoy was originally published in Turkish in Cumhuriyet on October 4, 2026, and is republished in English on Bosphorus News with the author's permission.