JP Morgan Chase bank is blamed for the fall of Turkish lira
At the end of March, the Turkish government filed a claim against the holding company JP Morgan Chase. According to the charges, the actions and statements of the holding’s analysts led to a significant drop in the lira, which became a record after last year’s events. The team of JP Morgan’s analytical department recommended investing funds in dollars instead of the national currency of Turkey. This has caused a jump in the financial market and negatively affected the reputation of the Turkish banking system. At the moment, the Turkish Market and Capital Council is investigating the incident.
Reducing reserves and confronting JP Morgan Chase
In the near future, this situation will become a deterrent for investors. Besides, it will create a tense situation before municipal elections in Turkey.
Earlier Erdogan made accusations of an economic war against other countries, and the situation with JP Morgan will result in a serious confrontation with a large bank. In addition, at the beginning of the year the executive director of the Turkish branch of HSBC Holdings Plc was accused of insulting the head of state, and by Turkish standards it is considered a serious violation of the law. JP Morgan’s press center did not comment on the incident. The head of Turkey also said at a press conference that all banks responsible for the growth in demand for foreign currency and false forecasts of the lira exchange rate against world currencies will face criminal charges.
News of the launch of two investigations against JP Morgan were announced almost simultaneously, and this indicates the coordination of the authorities. It became known that the banking regulator is conducting a series of inspections against Turkish banks that artificially raised the demand for hard foreign currency on the eve of elections. The names of the financial institutions are not mentioned in the news statements.
The investigation was launched the next day after unsuccessful attempts to slow down the fall of the lira due to restrictions on foreign currency purchases. As a result, the lira lost 6.5% of its price in trading, and by Friday evening it lost 5% of its price. As a result, the ratio of losses for the year was 8%, which according to statistics brought the lira closer to the Argentine peso position.
The rumors that the central bank will use the reserves to stabilize the national currency have only lowered the lira’s position, before currency intervention has not been resorted to since 2014. For 14 days, as of March 15, the reduction in the central bank assets amounted to $6.3 billion and was a record for the last 5 years. According to officials, this is due to the recovery of foreign debt and the conclusion of deals with energy companies. Earlier Erdogan stated that he would not allow high borrowing costs, but recently he did not make such statements, and directed resources to restore confidence in the central bank.
Relations between Turkey and America continue to be in a tense phase for other reasons as well, and this is a concern for investment companies. The situation has also been exacerbated by the Turkish government’s imposition of sanctions against the US and accusations of espionage. Buying military missile equipment from Russia will further exacerbate Erdogan’s political relations with Trump.