Erdoğan bids to contain fallout from Turkey’s $18bn stock market scandal
President says those ‘engaged in manipulative schemes’ will be held to account as deputy chair of governing party resigns
Turkey’s economy is “robust” and whoever was “engaged in manipulative schemes” will be held to account, President Recep Tayyip Erdoğan said as his government seeks to contain the fallout from an $18bn stock market scandal.
Speaking late on Monday after a lengthy cabinet meeting, Erdoğan also said that his government was working on how to “prevent a similar issue from recurring”.
The collapse earlier this month of what officials have alleged is a Ponzi scheme has since been linked to at least one high-ranking government official.
On Sunday, Fatma Betül Sayan Kaya, deputy chair of Erdoğan’s governing Justice and Development Party, resigned after an opposition politician alleged that she and her husband made millions of dollars from trading shares in one of the companies caught up in the scandal.
“The necessary investigations are being conducted into those who have engaged in manipulative schemes . . . to secure unfair gains,” Erdoğan said. “Those found to have been involved in market-disrupting activities via these funds will be held to account.”
Kaya, a former families minister, said she had offered Erdoğan her resignation so that her “position [was] not subject to controversy” during the investigation and to protect “the integrity of the [investigation] process”.
The so-called “funds crisis” erupted after funds managed by asset manager Tera Portföy failed to meet redemption requests. Problems subsequently spread to other asset managers, prompting a run on funds and forcing regulators to step in.
The financial implosion has affected the savings of more than 450,000 investors in 131 funds. Analysts said their potentially heavy losses could affect Erdoğan’s standing among voters already weary of years of high inflation and falling real wages.
“There is a growing perception that [Erdoğan] or his close aides knew about the manipulative practices,” said Atilla Yeşilada, an Istanbul-based analyst at the consultancy GlobalSource Partners. “The resignation of party vice-chair . . . adds weight to this perception.”
Prosecutors on Monday also issued an arrest warrant for İskender Balcı, until recently an independent director of a company linked to the scandal. Balcı, who surrendered to authorities later in the day, is the son of a former board member of Turkey’s banking supervisory body BDDK, and the son-in-law of Osman Çelik, a deputy treasury and finance minister.
Balcı said on Monday that his role was as a non-executive independent director, with no authority over daily operations or share trading, and that when he learnt of certain share price movements he “repeatedly expressed” his “deep discomfort” to the board and, ultimately, resigned.
Other prominent figures have also sat on the boards of companies that have been caught up in the affair, including a university rector and a former ambassador.
The government has moved swiftly to limit the financial fallout of the scandal, and authorities have appointed İşbank and state-owned Ziraat Bank to liquidate affected funds and distribute the proceeds to investors, a process that could take up to six months.
On Monday, Turkey benchmark’s BIST-100 index shed 2 per cent, extending an almost 11 per cent drop since the market shake-out accelerated two weeks ago. But currency markets have remained calm, with no obvious flight into dollars by worried Turkish savers.
“There is no problem with our economy,” Turkish vice-president Cevdet Yılmaz told business leaders on Saturday, describing the fund scandal as a “temporary problem in a limited area” from which Turkey’s capital markets would emerge stronger.