UPDATE 1-Turkey to liquidate Bank Asya if sale not agreed within three months

(Adds detail, background, fund comment)

ISTANBUL, March 1 (Reuters) - Turkey’s Bank Asya will not be returned to its original shareholders after being seized by the government last year, the deposit insurance fund that now owns the bank said, adding that it would pursue liquidation if a buyer is not found within three months.

The government seized the assets of the Islamic lender last May, saying its financial structure and management presented a threat to the financial system.

Founded by followers of United States-based Islamic cleric Fethullah Gulen, Bank Asya is one of more than 20 Gulen-related companies, including some opposition media outlets, that have been hit in a government crackdown.

President Tayyip Erdogan has accused Gulen, a former ally, of trying to overthrow the government by building a network of supporters in the judiciary, police and media. Gulen, whose adherents run schools, broadcasters and newspapers, denies the charges. The cleric has lived in self-imposed exile in the United States for more than a decade.

“Within the framework of the existing legal situation, the return of the bank to its (shareholders) is not possible,” the Deposit Insurance Fund (TMSF) said on Tuesday, adding that it had given the bank a three-month deadline from Feb. 29 to find a buyer or be merged.

“If this is not possible, its liquidation will come on to the agenda,” the TMSF said.

Last week the chairman of the TMSF told reporters it was in talks to sell the bank.

The campaign against Bank Asya started almost two years ago when its depositors, including state-owned companies and institutions and foreign fund managers, withdrew 4 billion lira ($1.36 billion), amounting to about 20 percent of its deposits, eroding its earnings and capital base.

Reporting by Behiye Selin Taner, Can Sezer and Daren Butler; Writing by David Dolan; Editing by Nick Tattersall and David Goodman