Germany cracks down on Turkey’s Ziraat Bank
Germany’s Federal Financial Supervisory Authority (BaFin) has restricted the activities of Frankfurt-based Ziraat Bank Internatinal AG in the country following discrepancies in high-profile loans and in collection of deposits.
The Germany-based chapter of Turkey’s state-owned Ziraat Bank is facing deposit restrictions and a ban on large-scale loans, according to a report by the Sözcü newspaper.
BaFin has also rejected four candidates for general director that Turkey had suggested, Sözcü said.
The banking authority announced a series of severe penalties, considered the last step before shutting down the bank completely, without naming Ziraat exclusively. The unnamed entity, believed to be Ziraat as the bank was audited recently, will face the following:
-A ban on large-scale loans, where the bank will no longer be able to offer loans of millions of Euros in return for collateral in Turkey.
-A ban on accepting large-scale deposits and offering interest rates above market value.
-A warning on the administration, and a rejection of directors chosen by Turkey.
-An order for the bank to use its own capital in all banking operations and increased demand for guarantees for administratory operations.
The bank was also issued large fines, Sözcü said, due to the credits it issued to companies in Turkey via Ziraat Germany since 2017.
Turkey’s recent laws on repatriation of capital, resulting in uninspected money of unknown origin being sent to the country in the last two years, was another reason for the severe penalties.
German authorities decided against shutting Ziraat down to avoid a diplomatic crisis with Turkey, but the measures enacte against it are equal to a ban on the country’s largest lender, Sözcü cited an unnamed expert as saying.
The discrepancies were first detected in July, when an unnamed source told Reuters that there were “some ratios which don’t match in the bank’s balance sheet”.
The bank had issued a $1.6 billion loan to Çukurova Holding in 2014 to recover a 13.8 percent share in Turkcell, the country’s largest mobile network provider. The loan was used by a company in the tax haven Virgin Islands, as revealed in an Exchequer Court probe earlier this year, Sözcü’s Çiğdem Toker wrote in March.
Ziraat Bank International AG has more than 250 million euros in own capital and seven branches in Berlin, Duisburg, Frankfurt, Hamburg, Hannover, Cologne and Munich.
The state-owned lender is also accused of fraud, money laundering and conspiracy over its involvement in a scheme for Iran to evade U.S. sanctions via the trade of gold, oil and natural gas.