Turkey banking shares weaker, regulator dismisses Iran sanctions report

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Updated 24 October 2017
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Turkey banking shares weaker, regulator dismisses Iran sanctions report

ISTANBUL: Shares of Turkey’s banks and the lira currency fell on Monday as comments from the national banking regulator failed to erase investor concerns over a report that lenders could face substantial US fines for evasion of Iran sanctions.
The Haberturk newspaper on Saturday reported six banks potentially face substantial fines, citing senior banking sources. It did not name the banks. One bank faces a penalty in excess of $5 billion, but other fines will be lower, it said.
“It has been brought to the public’s attention that stories, that are rumors in nature, about our banks are not based on documents or facts, and should not be heeded,” the BDDK banking regulator said in a statement at the weekend, adding that Turkey’s banks were functioning well.
A spokesman for the US Treasury, which is responsible for US sanctions regimes, said: “Treasury doesn’t telegraph intentions or prospective actions.”
Two senior Turkish economy officials told Reuters Turkey had not received any notice from Washington about such penalties, adding that US regulators would normally inform the finance ministry’s financial crimes investigation board.
The report comes as relations between NATO allies Washington and Ankara have been strained by a series of diplomatic rows, prompting both countries to cut back on issuing visas to each other’s citizens.
“Given the level of tensions with the US, the market is still skeptical about this denial and they would want to hear a denial from the US to really calm down,” said Inan Demir, a senior emerging market economist at Nomura.
“The numbers mentioned are large ... the largest fine mentioned was $5 billion and that would be a very large fine in comparison to any bank’s equity in Turkey,” Demir added.
The Istanbul stock exchange’s index of banking shares declined 3.2 percent on Monday, underperforming the main share index, which fell 1.09 percent. The lira weakened nearly 1 percent to 3.7050 against the dollar during the day, while the cost of insuring Turkish debt against default spiked to its highest in 12 days.
US authorities have hit global banks with billions of dollars in fines over violations of sanctions with Iran and other countries in recent years.
US prosecutors last month charged a former Turkish economy minister and the ex-head of state-owned Halkbank with conspiring to violate Iran sanctions by illegally moving hundreds of millions of dollars through the US financial system on Tehran’s behalf.
Halkbank has said all its transactions have fully complied with national and international regulations.
President Tayyip Erdogan has said he told Washington that Turkey had never agreed to comply with its sanctions on Iran, and has called on the United States to review the indictment.
The US prosecutors’ charges stem from the case against Reza Zarrab, a wealthy Turkish-Iranian gold trader who was arrested in the United States over sanctions evasion last year. Erdogan has said US authorities had “ulterior motives” in charging Zarrab, who has pleaded not guilty.
Simon Quijano-Evans, emerging market strategist at Legal & General Investment Management, said US-Turkish relations were at the top of the list of issues investors were focused on. “Any negative or positive noise on that front can cause stronger market reaction in either direction.”


Air France says new strikes put airline’s situation ‘even more at risk’

Updated 47 min 24 sec ago
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Air France says new strikes put airline’s situation ‘even more at risk’

PARIS: The French prime minister and Air France both issued warnings on Thursday over the damage caused to the airline by workers striking over pay, in a dispute that has so far cost Air France some €300 million.
Air France is balloting staff over its offer of a 7 percent pay rise over four years, after unions rejected the proposal as too modest.
Three pilot unions on Thursday called for more strikes over the May 3-8 period — a move condemned by the airline as putting its economic situation “even more at risk.”
Prime Minister Edouard Philippe said Air France faced significant “turbulence” if it lost its battle with unions. The French state holds 17.6 percent of the Air France KLM group.
Air France KLM Chairman and Chief Executive Jean-Marc Janaillac has said it would be hard for him to stay if staff voted against the offer, and he issued an apology to the airline’s customers in a statement on Thursday.
“I have complete faith in the desire of Air France staff to put an end to this destructive situation for our airline,” added Janaillac in his statement.
Philippe said Janaillac had shown “courage” by putting his job on the line but warned that a negative vote could further harm the company.
“If the consultation did not produce the results he hoped for and he took the consequences, everyone should fasten their seat belts because the turbulence will not be minor,” he told Europe 1 radio. “A company that loses its boss in these conditions is not well placed to face the future.”
The industrial action, affecting about 30 percent of Air France flights, has coincided with French railway strikes over the last month, resulting in widespread travel disruption.
SNCF workers have launched a series of protests against reform plans by President Emmanuel Macron’s government, designed to stem the state-owned railway’s losses and cut debt.