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August 10, 2018 www.intellinews.com I Page 3
est exposure to Turkey. Carsten Hesse, a Euro- pean economist at Berenberg, put out a research note saying that some eurozone banks were under pressure given "their direct equity exposure to Turkish banks or participation in syndicated loans — a loan offered by a group of lenders."
BIS figures also showed that Japanese banks are owed $14bn, UK lenders $19.2bn and US lenders about $18bn by Turkish borrowers.
ECB looking more closely
The Financial Times reported on August 10 that in line with the lira’s decline, the Single Supervisory Mechanism — the wing of the European Central Bank (ECB) set up to monitor the activity of the region’s biggest banks — has over the past couple of months begun to look more closely at European lenders’ links with Turkey.
It does not yet view the situation as critical, two people familiar with the matter were quoted as saying.
The ECB is reportedly concerned about the risk that Turkish borrowers might not be hedged against the lira’s weakness and begin to default
Russian shares tank on US announcement of new Russia sanctions over UK poisoning
The news adds to sanction pressure on Russia that has been mounting following the bipartisan outrage in Washington after the US-Russia sum- mit in Helsinki.
The shares of Russian blue chips in London on August 8 dropped on the announcement, with Russia's most valuable company Sberbank losing
on foreign currency loans, which make up about 40% of the Turkish banking sector’s assets.
Analysts at Goldman Sachs said earlier this week that a depreciation in the TRY to 7.1 against the dollar “could largely erode Turkish banks’ excess capital”. The analysts viewed Yapi Kredi as the weakest positioned of Turkey’s biggest banks in terms of capitalisation. UniCredit made a €2.5bn investment in taking a 40.9% holding in Yapi Kredi. The value of that stake has been more than halved.
Berat Albayrak, the recently appointed finance minister and Erdogan’s son-in-law, was unveiling Turkey’s “new economic model” on the afternoon of August 10, detailing moves to cut debt, the budget deficit and the large current account gap. The markets had been deeply underwhelmed by a preview the previous day.
Charles Robertson, chief economist for emerging markets-focused Renaissance Capital, said: “The markets have lost confidence in the triumvirate of President Erdogan, his son-in-law as finance minister and the [central bank’s] ability to act as it needs to.”
almost 8%. Even prior to the announcement talk of possible new sanctions pressured the Russian market, with ruble losing 2% against US dollar on August 8 and yields of 10-year federal ruble OFZ bonds breaking 8% for the first time since spring 2017. The US government has threatened to im- pose “crushing” sanctions in Russia this autumn.
State Department spokeswoman Heather Nauert on August 8 said it had been determined that Russia “has used chemical or biological weap- ons in violation of international law, or has used lethal chemical or biological weapons against its own nationals.”
The new sanctions would cover sensitive nation- al-security controlled goods, which could poten-