Turkey investors do not believe Halkbank fine for contempt will happen
Investors do not believe that Turkey’s state-run Halkbank will become liable for a proposed fine for contempt of court in the United States, Bloomberg reported.
Prosecutors in New York requested on Tuesday that a judge impose a daily $1 million penalty that would double each week after Halkbank refused to show up in court to answer charges that it helped Iran evade U.S. sanctions.
If enacted, Halkbank would be liable to pay $1 billion by early March. The financial penalty would amount to the net foreign currency reserves of Turkey’s central bank should it not pay for a few more weeks. By the middle of May, the fine would be equal to Turkey’s annual gross domestic product, Bloomberg said.
But the lira, which imploded during a currency crisis in the summer of 2018, has hardly moved against the dollar since the request was filed.
“The market doesn’t believe at all that this is going ahead. If it did, the lira would have performed very differently,” said Cristian Maggio, head of research for emerging markets at broker TD Securities in London. “Or perhaps the market assumes that Halkbank complies straight away?”
The lira fell 0.2 percent to 5.94 per dollar at 12:40 p.m. in Istanbul on Friday. It ended trading on Tuesday at 5.93 against the U.S. currency.
Halkbank denies the charges. A deputy chief executive of the lender was jailed by a Manhattan jury in January last year, finding him guilty of conspiring to help Iran dodge the economic sanctions. Turkey’s government has slammed the case as fabricated.