These Are The 5 Banks Most Exposed To Turkish Chaos

Despite Erdogan's ever more desperate attempts to keep the lira elevated ahead of this weekend's local elections, culminating with sending overnight TRY swap rates to an insane 1300% on Wednesday, consensus is now that after this weekend's catalyst passes things will quickly go from bad to worse for Turkey as Turkish official foreign reserves plummet, putting the nation on the verge of a liquidity (and solvency, if enough foreign investors have lost faith) crisis.

This sentiment is shared not only by locals, where government data showed a panic scramble out of lira as Turkish residents increased their their hard-currency holdings for an 11th week running, the longest streak since September 2013, to a record $179 billion, but also foreigners, with TD Securities strategist Cristian Maggio tempting fate (and Erdogan's assassination squad) overnight with a recommendation to buy USDTRY calls with a 7.9 target, predicting that "attempts to maintain lira stability ahead of local elections may ultimately prove unsustainable and USD/TRY may move significantly higher when normal conditions are restored."

In any case, the Lira has been a one way train lower ever since the Turkish Central Bank ended the idiotic experiment with crushing all foreign investor confidence by boosting swaps to mindblowing levels.

 

Amid the collapse in Turkish central bank reserves, the plunge in the lira and local financial assets, should a worst case scenario for Turkey materialize, questions relating to European banks exposure to Turkey have once again resurfaced as they did last summer.

Responding to these questions, and seeking to mitigate some of investor panic, overnight Goldman's Jernej Omahen writes that the most recent data suggests:

  1. Turkey exposure of EU banks is limited in scope and scale;
  2. Contagion channel via EU banks is somewhat limited
  3. Deteriorating outlook might incrementally add to (the already changing) strategies of European banks in Turkey as this is the second period of elevated volatility in Turkish assets within the past c. one year, the first being Q3-18;
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