Turkish lira weakens, Moody's delivers more downgrades

People look at foreign exchange rates in Ankara, Turkey, on August 28, 2018. / AFP / ADEM ALTAN
Updated 28 August 2018
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Turkish lira weakens, Moody's delivers more downgrades

ISTANBUL: The Turkish lira weakened on Tuesday as investors weighed up Turkey's efforts to manage its rift with the United States after Finance Minister Berat Albayrak said U.S. trade sanctions against Ankara could destabilise the Middle East.
The currency has lost about 38 percent of its value against the dollar this year due to a sell-off accelerated by a row with Washington over an American evangelical Christian pastor detained in Turkey on terrorism charges.
More broadly, investors are worried about the direction of monetary policy under President Tayyip Erdogan. The president, a self-described "enemy of interest rates" has repeatedly put public pressure on the central bank and picked Albayrak, his son-in-law, as finance minister.
The attendant sell-off in the lira has raised concerns about the impact on the broader economy - given Turkey's reliance on dollar-denominated energy imports - and a possible surge in bad loans in the banking sector.
At 1527 GMT, the lira stood at 6.2561 against the dollar, weakening from a close of 6.1200 on Monday, when it weakened to near 6.3 before rebounding in its first day of trade after a week-long holiday.
The main stock index rose 2.83 percent by Tuesday's close to 93,866.94 points.
"At this point in time Turkey has become pretty much un-tradable," said Tim Ash of BlueBay Asset Management in emailed comments. "The market wants to see specific delivery on policy whether that is monetary, fiscal or action to clear up problems in the banking sector."
Germany denied a report that it might provide financial aid to Turkey to help it weather the currency crisis.
Also on Tuesday ratings agency Moody's downgraded 20 Turkish financial institutions, saying there were signs of substantial increase in risk of a downside scenario. It said Turkey's operating environment had deteriorated beyond previous expectations.
"TURKEY MUST REFORM ITSELF"
Facing economic pressure from the United States, Turkey has signalled a wish to improve strained ties with the European Union, which it still aspires to join despite disagreements.
After meeting his French counterpart in Paris on Monday, Albayrak also took aim at the United States, saying U.S. sanctions could ultimately aggravate the region's terrorism and refugee crises..
Both Erdogan and Albayrak are also set to visit Germany at the end of September.
The Wall Street Journal reported that Germany was in early stage talks to provide emergency financial aid to Turkey, fearing its economic troubles could spread to Europe and further destabilise the Middle East. But a German official denied this.
"You can't do much from the outside but to stress that Turkey must reform itself," a second official told Reuters.
U.S. President Donald Trump this month authorised a doubling of duties on aluminium and steel imported from Turkey, triggering retaliatory measures from Ankara.
Investors are also worried by a U.S. Treasury investigation into state-owned Turkish lender Halkbank, which could face a potentially hefty fine over allegations of busting sanctions on Iran. The bank has said all its transactions were legal.
Turkey and the United States are also at odds over their diverging interests in Syria and U.S. objections to Ankara's plan to buy Russian defence systems.
Separately, Ankara announced a new campaign on Tuesday to support the real estate sector, offering a 10 percent discount on some home sales. Under the campaign, any price increases due to rising exchange rates will be discounted from the cost of the residence, the environment and urbanisation minister said.


‘Judgment day’ looms for Australia’s scandal-hit banks

Updated 15 min 53 sec ago
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‘Judgment day’ looms for Australia’s scandal-hit banks

  • Firms like Commonwealth Bank, NAB, ANZ and Westpac are among the world’s most profitable financial institutions
  • ‘We have to be aware that regulators do run serious risks of being captured by industry’

SYDNEY: Australia’s scandal-plagued banks are braced for “judgment day,” as a public inquiry into industry misconduct prepares to publish its initial findings after months of damning customer testimony.
The financial sector — including Australia’s all-powerful “big four” banks — faces a public backlash and the prospect of tighter regulations when an interim Royal Commission report is published before a Sunday deadline.
Firms like Commonwealth Bank, NAB, ANZ and Westpac are among the world’s most profitable financial institutions and largely avoided the shackles placed on US and European banks in the wake of the global financial crisis.
But a raft of reports of them issuing dodgy financial advice, life insurance and fraudulent mortgages forced a reluctant business-friendly government to call for a Royal Commission late last year.
Since then, a series of hearings involving almost 10,000 submissions and more than 100 witnesses has stunned even hardened observers.
They included accounts of NAB staff accepting cash-stuffed envelopes to pass dubious loans and help them “smash” sales targets, while staff at Commonwealth Bank — Australia’s largest firm — charged fees to customers who had died up to a decade before.
“This is a shocking wake-up call to the business community,” said the government’s former competition tsar Graeme Samuel.
The sector needs to admit that “something’s fundamentally wrong,” he said.
The inquiry has already claimed several scalps, including the chairman of the country’s largest wealth manager AMP, who quit in April days after the chief executive stood down when it was revealed the firm charged clients for advice they never received.
A decade ago the sector was lauded for emerging unscathed from the global financial crisis and avoiding the risky investments that doomed their peers.
Commentators say that successes may have bred complacency among banks as well as the government and regulators.
In Samuel and other analysts’ books, regulators had sufficient powers to reign in wayward banks — but failed to do so.
“We have to be aware that regulators do run serious risks of being captured by industry,” he said.
“It requires a strong discipline on the part of regulators to prevent it from occurring, so this will be a wake-up call.”
Recently installed Australian Securities and Investments Commission chairman James Shipton has vowed to bring about cultural change.
The agency on Tuesday released its own damning report finding “unacceptable delays” in banks’ reporting and addressing “significant breaches” of laws.
Major banks were taking an average time of 1,726 days — or more than 4.5 years — to identify significant breaches, ASIC found.
Even then, financial institutions took an average of 226 days from the end of their breach investigation to make the first payments to affected customers.
Shipton said the figures were a “sad indictment” of the sector.
More oversight and tighter rules are likely to be raised in the interim Royal Commission report, which has been dubbed the banks’ “judgment day” by some analysts and media.
The commissioner, former High Court judge Kenneth Hayne, could also find the banks had breached civil and criminal provisions for alleged misconduct.
Most banks are already moving to spin off their financial advisory arms from their main activities to avoid conflicts of interest raised during the hearings.
One more round of hearings focusing on policy forums will run in November, with Hayne’s final report due by February 1 next year.