TURKEY: Treasury acts against ailing bank

22 April 1994

The treasury has banned the troubled private-sector TYT Bank from collecting deposits. The bank is one of several hit hard by the foreign exchange crisis, according to financial sources.

The institution has also been banned from any banking activities until the treasury completes an inspection, according to the minister of state for economic co-ordination, Aykon Dogan. The bank has assets totalling $406 million and 11 branches in Turkey. It is owned by Lapis Holding, a tourism, finance and contracting group.

State insurance covers up to TL 150 million ($4,200) of each depositor in the bank, according to the Anatolian news agency. Compensation payments will be made if necessary by the leading private-sector institution Turkiye Is Bankasi (Is Bank).

From Lapis Holding, Is Bank has also repossessed a 89.12 per cent stake in the medium-size Turk Dis Ticaret Bankasi, which specialises in foreign trade. The officials say Lapis had failed to meet payments for the stake, acquired from Is Bank in summer 1993 for $213.8 million. An advance payment by Lapis of $75 million was to have been followed by three further tranches.

The Cyprus-based ratings agency Capital Intelligence has placed all Turkish institutions on a 'provisional' basis. 'There is so much volatility at the moment that even the best banks could find themselves in difficulties. Turkey faces at least six difficult months,' says its director, Elisabeth Jackson-Moore. However, she adds: 'We think the Turkish market is very resilient, and things will work out in the end.'

Institutions most at risk from the crisis are those squeezed between large short foreign exchange positions and portfolios of unprofitable government paper, say bankers.

The total short position of the banks had been reduced to about $3,000 million by the end-March local elections, from $5,000 million-6,000 million prior to the crisis, according to bankers. However, rapid depreciation is still increasing losses. A 28 per cent devaluation accompanied the austerity package introduced by Prime Minister Tansu Ciller on 5 April (see box).

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