Turkey Regulator Said to Ask Banks to Share Post-Coup Reports

  • Turkey disapproves of negative reports, regulator’s chief says
  • S&P cut seen as an extension of coup attempt: Erdogan adviser

Turkey is requesting that some banks with offices in the country share the market analysis they’ve written after Friday night’s failed coup attempt, according to three people familiar with the matter.

The banking regulator contacted at least three international investment banks to formally request the macroeconomic reports they’ve sent to clients in recent days, the people said, asking not to be identified because of the subject’s sensitivity.

A day after S&P Global Ratings downgraded Turkey’s credit rating to a further notch under investment grade, the head of the country’s banks regulator has also cautioned against talking down the economy.

"We disapprove of our banks publishing reports that would turn expectations and the atmosphere negative, like the international credit rating agencies did,” Mehmet Ali Akben, head of the banking regulator BDDK, was reported as saying by the state-run Anadolu Agency on Thursday. Osman Uzun, a spokesman for the BDDK, didn’t respond to phone calls and a text message seeking comment.

Market turmoil in the wake of the failed July 15 coup attempt sent the lira to a record low and battered the prices of other Turkish assets. Investors have expressed concern about both the tensions the coup attempt exposed, and the severity of the administration’s response.

S&P Downgrade

Turkish President Recep Tayyip Erdogan has sometimes been a critic of foreign banks and their economists, and he and his aides have repeatedly alluded to an "interest rate lobby" they blame for market speculation and higher-than-desirable interest rates. After the 2013 Gezi Park protests, Erdogan used that term to accuse financiers of seeking to profit from chaos.

The lira traded as low as 3.0973 to the dollar on Wednesday,  about 7 percent weaker than its trading level in the days before the attempted coup and slicing through the previous record from 2015. Yields on 10-year bonds have risen every day since then. S&P cut Turkey’s rating to BB from BB+ with a negative outlook, citing the further fragmentation of the nation’s political landscape.

The downgrade by S&P might be viewed by the Turkish public as an "extension" of the coup attempt, Cemil Ertem, a chief adviser to Erdogan, said in an interview on NTV television on Thursday. Contrary to predictions that Turkey will suffer investment outflows, capital inflows will accelerate, he said.

Moody’s Investor’s Service had said on July 18 that it was reviewing Turkey’s Baa3 rating, the lowest investment grade, with an eye to a potential downgrade. Analysts at banks from Barclays Plc to JP Morgan Chase & Co. warned of billions of dollars of outflows that could ensue if Turkey loses one of the two investment-grade ratings that it currently holds from Moody’s and Fitch Ratings Ltd.

A purge of government institutions since the coup attempt that has claimed tens of thousands of jobs extended to the banking regulator itself on Tuesday, when 86 people were removed from their positions, the state-run Anadolu Agency reported.

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