TURKEY: Banks may reopen

14 October 1994

Rulings from the council of state in the week ending 30 September have paved the way for the reopening of three small banks closed by the government in April at the peak of the foreign exchange crisis. However, they would probably require significant infusions of government funds, bankers say (MEED 22:4:94; 6:5:94).

The three institutions are TYT Bank, Marmara Bankasi and Impexbank. The latter two were undermined by a run on foreign exchange and lira deposits in smaller banks prompted by TYT's collapse. Shortly afterwards, the government was forced to issue a blanket decree on 5 May guaranteeing the full amount of all deposit accounts in the banking system. This compared with the ceiling of TL 150 million ($4,400) a person previously applying under a mandatory savings insurance scheme for the banks.

The council, the country's highest administrative court, has ruled that the three failed institutions should also have been covered retroactively by the decree. However, the government has appealed against this ruling. A final decision is also awaited from the council of state on the validity of the closure of the banks by the council of ministers. The situation has been confused by contradictory rulings from the council of state granting and denying injunctions sought by various owners and creditors in individual cases against the closures.

Banking sources say Prime Minister Tansu Ciller herself would like to see the three banks reopened in order to restore international confidence in the banking sector. However, the treasury has consistently refused to compensate foreign institutions for losses incurred by the closures.

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