German authorities could better serve both consumers and the integrity of the global financial system by disclosing which Turkish financial institution received severe punishments from the German financial watchdog, BaFin, Aykan Erdemir, Turkey director at Foundations for Defence of Democracies, said on Tuesday.
Last weekend, several Turkish media outlets reported that BaFin had restricted the activities of Frankfurt-based Ziraat Bank International AG, a branch of Turkey’s largest state-run lender Ziraat Bank, following discrepancies in high-profile loans and in the collection of deposits.
The banking authority announced a series of severe penalties, considered the last step before shutting down the bank completely, against the unnamed lender. It will be subject to the following sanctions:
-A ban on large-scale loans, where the bank will no longer be able to offer loans of millions of Euros in return for collateral in Turkey.
-A ban on accepting large-scale deposits and offering interest rates above market value.
-A warning against the administration, and a rejection of directors chosen by Turkey.
-An order for the bank to use its own capital in all banking operations and an increase in guarantees for administratory operations.
“BaFin states that it may choose to announce measures against financial institutions anonymously “if the publication would cause disproportionately great damage to the institution, for example in the form of damage to its reputation or loss of trust by other market participants”,” Erdemir said
Erdemir recalled that in October 2019, U.S. prosecutors charged Halkbank, Turkey’s second-largest public lender, with participating “in a multibillion-dollar scheme to evade U.S. sanctions on Iran” which led to the conviction of Halkbank’s deputy general manager on related charges.
“During his 2017 trial, the main witness also implicated Ziraat Bank, which shuttered its New York branch less than two weeks later. More recently, Ziraat came under further scrutiny for deals, sovereign questionable offshore conflicts of interest, and irregular transactions with Turkey’s wealth,” Erdemir said.
Both Ziraat and Halkbank are run by Turkey’s sovereign wealth fund, which is chaired by President Recep Tayyip Erdoğan.
Erdemir said German officials should publicly reveal the name of the financial institution that is now subject to the sanctions.
“German authorities could better serve both consumers and the integrity of the global financial system by disclosing which financial institution merited such severe punishments,” he said. “Journalists may have identified the culprit, but denials will persist until BaFin removes the unwarranted veil of anonymity.