(Bloomberg) -- Turkish central bankers long played to an audience of one.

When it came to Hafize Gaye Erkan, President Recep Tayyip Erdogan’s trust hardly wavered until the very end. But by then, what proved her undoing was that she’d lost the confidence of other heavyweights like Finance Minister Mehmet Simsek who were on a mission to give the nearly $1.1 trillion economy a facelift.

For her critics inside the central bank and in Turkey’s corridors of power, the end to Erkan’s almost eight months at the helm was the culmination of her clashes with staff and ultimately a power play that misfired, according to people with knowledge of internal deliberations, who asked not to be identified because they’re not authorized to speak with the media. 

Turkey’s first female central bank governor — who spent nearly a decade at Goldman Sachs Group Inc. — said instead she saw it as “a major character assassination campaign” and said she resigned to protect her family and young child. 

Erkan’s arrival to accolades — along with Simsek amid a return to conventional policies — following Erdogan’s reelection last May staved off the threat of a balance-of-payments crisis and potentially a disorderly currency devaluation. Behind the scenes, however, the group of technocrats installed by Erdogan began to show cracks barely months into the job, the people said.

The central bank and the Treasury and Finance Ministry declined to comment for this story. Calls and messages to Erkan went unanswered.

Even as a backlash against her built inside policy circles, Erkan was winning the praise of foreign officials and many investors as knowledgeable and a straight talker who boasted a network of contacts in the US.

Though she’s gone from the central bank, her team remains largely intact with the elevation of Fatih Karahan — Erkan’s deputy seen as a policy hawk — to replace her. But piecing together the timeline of events casts new light on an institution whose last five governors, including Erkan, all departed before completing a single term.

It’s a case that will be important for investors closely following one of the emerging world’s most tantalizing comeback stories — in a country where the policy roller-coaster under Erdogan chopped foreign holdings of local debt by about 96% in just over a decade.

The attention on Erkan’s apparent shortcomings was also a stark contrast to the treatment doled out to her male predecessors. Some of the former central bankers did Erdogan’s bidding to the detriment of the economy but never received the same treatment from the press or politicians.

That may well raise questions about the role gender played in Erkan’s downfall, and more broadly the status of Turkish women in an economy where their participation rate in the labor market is the lowest in the 38-nation Organisation for Economic Cooperation and Development.

This story is based on conversations with people with direct knowledge of the events. They all requested anonymity to speak freely about a sensitive matter.

When she returned to Turkey last June, Erkan was a stranger to many in her home country after more than 20 years spent in the US, where she earned a doctorate from Princeton University in financial engineering and applied mathematics, according to her LinkedIn profile. 

Erkan took on the job in Turkey after almost eight years at First Republic Bank, including about six months as its co-head, and then several months as chief executive officer of Greystone, a New York-based commercial-property lender.

Less than two weeks after her appointment, she embarked on one of Turkey’s longest cycles of monetary tightening.

Prices continued to spiral upward but policymakers no longer indulged in the wishful thinking that low interest rates can cure inflation, which had often been commonplace before Erkan. Gross foreign-exchange reserves are up more than 50% since she took over, even as stealth interventions in the currency market continued.

During the time Erkan was in charge, foreign investors purchased a net $5.3 billion in government bonds and Turkish stocks, according to data from the central bank. The benchmark Borsa Istanbul 100 index rose more than 60% in that period.

Investor confidence strengthened — but for some inside the government, tensions were already starting to mount. Erkan was not always the technocrat she was often perceived as publicly, some of the people said.

After a couple of months in the job, Erkan started building a politically savvy team of advisers, selecting those who had previously worked for ministers or government officials, the people said.

The governor’s first interview, to a local daily in December, confirmed their read of Erkan’s ambitions, the people said. In it, she once more seemed to strike a dovish tone, saying policy was already tight enough. That comment led some members of the rate-setting committee to believe the governor wanted to appear more sympathetic to Erdogan and that she could start a premature easing cycle, some of the people said.

Others seized on something else entirely. In the interview, Erkan said she was unable to afford a place in Istanbul and had to move in with her parents, while also questioning why prices weren’t falling. The remarks went viral on social media among Turks incredulous at the complaints of someone who had earned millions in finance.

When Erkan exited First Republic Bank — a regional US lender that collapsed in 2023 about a year and a half after she departed — she left with more than $23 million, regulatory filings show.

For some members of the government, her comment on house prices was interpreted as too political and at odds with the technocratic image the economic leadership wanted to project.

Tensions within the rate-setting Monetary Policy Committee came to a head in January when Erkan traveled to New York for investor meetings in the first such gathering organized by the central bank since Erdogan overhauled his economic team.

Erkan initially didn’t want to bring other deputy governors for the trip, according to the people. In the end, MPC members Fatih Karahan and Cevdet Akcay accompanied her. Hatice Karahan, her deputy in charge of investor relations, was absent.

The event held at the headquarters of JPMorgan Chase & Co. resulted in what some people described as mixed messages, with Erkan signaling an end to further rate hikes by January and her deputies delivering far more hawkish guidance.

That set the stage for Erkan’s departure three weeks later.

After wrapping up the investor talks, Erkan didn’t return to Turkey for another 10 days, extending the trip to nearly a month while she didn’t appoint an acting governor in her place.

While she was in the US, drama erupted back home when a local newspaper published allegations of her family’s role in the central bank’s affairs. 

People with knowledge of the matter told Bloomberg at the time that Erkan’s father was a constant presence at the bank and confirmed his involvement in its affairs — especially personnel decisions — despite having no official role at the institution. 

Erkan’s father would often participate in work events, including a meeting at the Istanbul Chamber of Industry. Simsek was among those taken aback by his involvement, the people said.

Days after the allegations came out, Erkan denied them and vowed to take legal action. In a statement on X, Erkan said she was in the US to hold further talks with investors. 

At that point, less than a week remained before January’s policy meeting, a period of communication blackout that precedes rate decisions.

The allegations and Erkan’s extended trip to the US disrupted discussions ahead of what proved to be an important point for monetary policy, the people said. 

The week last month in which policymakers would normally debate interest rates was instead taken up by multiple discussions between individual MPC members and Erkan over recent events. Simsek joined some of those meetings in an effort to mediate.

Tensions were also running high between her and Simsek. Increasingly, Simsek and other policymakers worried the tensions would call into question the credibility and reputation of the central bank. The finance minister eventually told Erdogan about the situation and asked the president to remove Erkan, people said.

The plan initially was to wait until local elections next month to avoid the perception of another policy pivot engineered by Erdogan, who ousted Erkan’s three predecessors for tightening monetary policy too much. 

The end came sooner than that.

Erkan announced shortly before midnight on Friday that she had asked to be “relieved of her duties.” A presidential decision published hours later said Erdogan “removed” her.

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