Fitch Ratings said on Thursday that the US investigation into a group of Turkish traders and bankers accused of conspiring to violate US sanctions on Iran could put Turkish banks’ ratings under pressure if the situation escalates, Reuters reported on Tuesday.
“Given the noise around the U.S. investigations, if there was a case of reputational damage resulting in diminished access to market or a large fine that wasn’t offset by state support, it could result in negative rating pressure,” said Lindsey Liddell, Fitch’s director of financial institutions.
Nine people including Turkish Iranian gold trader Reza Zarrab, Turkey’s Halkbank Deputy General Manager Mehmet Hakan Atilla, Turkish Economy Minister Mehmet Zafer Çağlayan and former Halkbank General Manager Süleyman Aslan have been criminally charged. Zarrab and Atilla have been held in US prison.
Liddell added that capital buffers in the Turkish banking sector were currently “sufficient to absorb moderate shocks.”
“However, risks to bank capitalization remain in the event of further lira devaluation or higher than expected non-performing loan growth.”
Zarrab was the prime suspect in a major corruption investigation in Turkey that became public in December 2013 in which with others from the inner circle of the ruling AKP government and then-Prime Minister Recep Tayyip Erdoğan for having paid Cabinet-level officials and bank officers bribes to facilitate transactions benefiting Iran.
After Erdoğan cast the case as a coup attempt to overthrow his government orchestrated by his political enemies, several prosecutors were removed from the case, police were reassigned and the investigation into Zarrab was dropped.
Cahit Akbulut, a New York-based lawyer who is closely following a case against Zarrab said on Wednesday that Zarrab is going to cooperate with US authorities.
Earlier on Tuesday, President Erdoğan said the case against Zarrab is a conspiracy against Turkey.
“One of the biggest traps of history was organized under the mask of law on Dec. 17-25 . They take the conspiracy and put it into practice in the US after they failed due to the tough stance and foresight of our nation,” said Erdoğan.
President Erdoğan on Oct. 24 strongly criticized the US administration for allegedly trying to force Zarrab to give them names from the Turkish government, saying he would explain all the details.
“They are driving him [Zarrab] into a corner, trying to make him an informer by saying, ‘If you mention those names, it [your prison term] will be this long, if you mention those names it will be that long’,” Erdoğan said, adding: “We are following this. We know how to set the world on fire when all those issues are done. We will tell all.”