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Halkbank Says Role in Iran Gold Legal After CEO Arrest

A Halkbank Branch Stands in Istanbul
Customers use automated teller machines outside a branch of Turkiye Halk Bankasi AS, also known as Halkbank, in Istanbul. Suleyman Aslan, Halkbank’s CEO, was formally arrested at the weekend after being detained last week. Photographer: Kerem Uzel/Bloomberg

Dec. 23 (Bloomberg) -- Turkiye Halk Bankasi AS, the state-run bank that slumped 19 percent since a graft probe implicating four ministers erupted last week, said it has acted lawfully after police arrested its chief executive officer.

Payments made by the bank on behalf of companies exporting gold to Iran were transparent and traceable, Halkbank said in a filing to the Istanbul bourse today. There were no rules against trading precious metals with Iran until July 1 and the bank ceased the transactions on June 10 after it became public that the U.S. planned new sanctions, it said.

Turkish police apprehended CEO Suleyman Aslan, the sons of three cabinet ministers and scores of others in three overlapping probes targeting corruption in government tenders, money laundering and gold smuggling. Prime Minister Recep Tayyip Erdogan’s government purged at least 60 police chiefs in response, sparking concerns of an escalating confrontation with former political ally, U.S.-based Islamic cleric Fethullah Gulen, who has a wide following in the police and judiciary.

“The allegation of high level graft, extending to Halk, are a real concern, along with connections into Iran, gold trade et al,” Tim Ash, chief economist for emerging markets at Standard Bank Group Ltd. in London, said in an e-mailed report to clients today. “Turkey is put increasingly under the spotlight in terms of international anti-money laundering conventions.”


Aslan was formally arrested two days ago after authorities found $4.5 million inside shoeboxes at his house, Hurriyet newspaper said last week. The money was to be donated to building Islamic schools in Turkey and Macedonia, he said, according to the newspaper.

Halkbank fell 1.9 percent to 12.90 liras at 2:17 p.m. in Istanbul, heading for the biggest five-day decline in more than two years. The company, Turkey’s largest listed state-run bank, was authorized by the U.S. to trade with Iran before the sanctions were introduced, and was the main bank used for purchases by Turkey of gas and oil from Iran.

Reza Zarrab, an Iranian-Azeri businessman, was among those arrested alongside Aslan on Dec. 21. Zarrab traded a ton of gold a day, Haberturk newspaper reported two days ago citing a statement he made to prosecutors. Zarrab said that he was involved in about 20 billion liras ($9.6 billion) of gold trading last year, Haberturk said. Zarrab’s lawyers didn’t answer calls placed to their offices in Istanbul seeking comment on the report.

Precious Metals

Turkey exported about $233 million in precious metals and jewelry to Iran per month in January through June, when Halkbank said it ended gold trading due to tighter U.S. sanctions implemented July 1. The nation exported about $45 million per month between June and October, according to data on the state statistics agency’s website.

Exports to Iran narrowed Turkey’s current account deficit, concern over which helped push the lira to a record low. The deficit may widen to 7.2 percent of gross domestic product this year from 6.1 percent in 2012, according to the median estimate of 29 economists surveyed by Bloomberg.

Four days ago, Turkish Foreign Minister Ahmet Davutoglu met with Iranian counterpart Mohammad Javad Zarif at a meeting of the Developing Eight, or D-8, in Islamabad, Pakistan. Economy Minister Zafer Caglayan, whose son Kaan was arrested in the graft probe, is scheduled to visit Iran Jan. 15. Erdogan is in Pakistan and due to return to Turkey tomorrow.

In a speech in the Black Sea city of Samsun yesterday, Erdogan said the corruption probe had an “international dimension” and threatened to expel diplomats who “exceed the limits of their duty.”

Four pro-government newspapers featured U.S. Ambassador Francis Ricciardone on their front pages two days ago, saying the U.S. had a hand in the corruption investigation.

To contact the reporter on this story: Isobel Finkel in Istanbul at

To contact the editor responsible for this story: Dale Crofts at

Banks Hoping for Tax Relief From Cameron Won’t Get It

Conservative U.K. Lawmaker Mark Garnier
Conservative lawmaker Mark Garnier said, “There is no way I’m going back to my constituents and saying, sorry guys, we’re struggling on whatever it happens to be, but the banks are OK.” Photographer: Jason Alden/Bloomberg

British banks looking for the new Conservative government to lower the levy on their balance sheets face disappointment, at least for now.

Tinkering with the tax would risk angering voters stung by the financial crisis and make it tougher to plug Britain’s budget deficit, said Mark Garnier, a Conservative lawmaker and member of the Treasury Committee.

The levy was introduced in 2010 after Britain sank about 1 trillion pounds ($1.6 trillion) into banks to prop up the nation’s financial system. The state still owns 79 percent of unprofitable Royal Bank of Scotland Group Plc and about a fifth of Lloyds Banking Group Plc.

“I don’t think anything will change on the bank levy before such time as we have no stake in RBS and Lloyds,” Garnier said in an interview. “There is no way I’m going back to my constituents and saying, sorry guys, we’re struggling on whatever it happens to be, but the banks are OK.”

The parliamentary majority Prime Minister David Cameron’s Tories unexpectedly won in the May 7 election allowed the City of London, as Britain’s financial district is known, to dodge tougher policies promised by his Labour Party challenger, Ed Miliband. In the runup to the vote, HSBC Holdings Plc threatened to quit the U.K. over increases to the levy and tougher rules. Standard Chartered Plc is also reviewing its London headquarters.

Best Case

Chancellor of the Exchequer George Osborne’s budget in March included an eighth increase to the bank levy. Last year, it generated 1.9 billion pounds, with HSBC paying the most, at 750 million pounds, followed by Barclays Plc at 462 million pounds.

For the levy to remain flat is probably the most banks can hope for, said Jason Napier, an analyst at Deutsche Bank AG in London. “We would see that as a decent outcome for the banks and for the way investors look at the stocks.”

The FTSE 350 Banks Index of eight companies has risen 2.2 percent since election day, partly on the view the Conservatives will be more sympathetic to banks’ concerns.

HSBC and Standard Chartered say the tax unfairly affects them because both make most of their revenue in Asia, not the U.K., and they weren’t bailed out by the state, as RBS and Lloyds were. Stuart Gulliver, HSBC’s chief executive officer, has said the levy stymies dividend growth. Shareholders such as Aberdeen Asset Management Plc urged the two banks to relocate.

The Bank of England will be in close contact with HSBC and recognizes the lender has a duty to assess where’s best to locate its headquarters following shareholder pressure, Andrew Bailey, CEO of the U.K. Prudential Regulation Authority, said at a conference in London.

‘Positive Signal’

“The bank levy imposes a significant cost on banking businesses in the U.K., which is making many banks move work and jobs to other parts of the world,” said Anthony Browne, CEO of the British Bankers Association, an industry lobby group. The latest levy increase “further disadvantages U.K. headquartered banks by increasing tax on their overseas activities, while their competitors in those markets do not pay this tax at all.”

Michael Spencer, the CEO of ICAP Plc and a former co-treasurer of the Conservative Party and prominent donor, has said he wants to see the balance-sheet tax reversed under Cameron’s government.

“An announcement from the chancellor that this tax is no longer going to go up and indeed will be steadily reduced over time would be an incredibly positive signal,” he told Bloomberg after the election.

One option to soften the levy might be to leave the headline rate unchanged while reducing the portion of the balance sheet the tax applies to, Garnier said. But no changes are likely to happen for some time, he said.

No Options

The finance industry would have seen its tax bill rise more under a Labour government. The opposition party had pledged to crack down on tax breaks used by hedge funds and private-equity firms, increase the bank levy again and impose a tax on bonuses for bankers to fund social programs.

“There has been a change in tone since the election,” said Tom Aston, a partner at KPMG who advises banks on tax. “Government is listening. However, there aren’t any obvious options without accepting a lower tax yield, which would cause corresponding pain elsewhere.”

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