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Is It Time For Eurozone Banks To Start Worrying About Turkey Again?

Is It Time For Eurozone Banks To Start Worrying About Turkey Again?

Authored by Nick Corbishley via NakedCapitalism.com,

The ECB has already warned once about the potential impact a plummeting lira could have on Euro Area banks heavily expos

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Is It Time For Eurozone Banks To Start Worrying About Turkey Again?

Authored by Nick Corbishley via NakedCapitalism.com,

The ECB has already warned once about the potential impact a plummeting lira could have on Euro Area banks heavily exposed to Turkey’s economy.

Turkey is in the grip of another big wave of its multiyear currency crisis. The value of the lira against the dollar has plunged by almost 40% so far this year, making it the worst performing emerging market currency. The currency is currently trading at just over 13 units to the dollar, compared to 7.44 in January and 3.78 at the start of 2018. On just one day this month (Nov 23), the currency plunged almost 20% before recovering slightly. The main cause of the collapse was the Central Bank of the Republic of Turkey’s decision to reduce interest rates for the third time since September, despite a slumping lira and surging inflation.

Contagion Risks

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At the height of the last big wave of Turkey’s ongoing crisis, in August 2018, the European Central Bank issued a warning about the potential impact the plummeting lira could have on Euro Area banks heavily exposed to Turkey’s economy via large amounts in loans — much of them in euros — through banks they acquired in Turkey. The central bank was worried that Turkish borrowers might not be hedged against the lira’s weakness and would begin to default on foreign currency loans, which accounted for 40% of the Turkish banking sector’s assets.

In the end, the contagion risks were largely contained. Many Turkish banks ended up agreeing to restructure the debts of their corporate clients, particularly the large ones. At the same time, the Erdogan government used state-owned lenders to bail out millions of cash-strapped consumers by restructuring their consumer loans, many of them foreign denominated, and credit card debt.  

But concerns are once again on the rise about European banks’ exposure to Turkey. On Friday, as those concerns commingled with fears about the potential threat posed by the new omicron variant of Covid-19, Europe’s worst-affected stocks included the four banks most exposed to Turkey: Spain’s BBVA, whose shares fell 7.3% on the day, Italy’s Unicredit (-6.9%), France’s BNP Paribas (-5.9%) and the Dutch ING (-7.3%).

The collapsing lira is almost certain to fuel even higher inflation in Turkey. In October, consumer price inflation in the country was already at an eye-watering 20%. That’s still not as high as the 25% peak registered in 2018, but it is likely to go a lot higher as the lira weakens. As prices soar, further eroding the savings and incomes of many Turks, so too will the risk of social and political unrest. Another cause for concern is that a weaker lira will make it even harder for businesses already battered by the fallout of the virus crisis to repay their foreign-denominated debts.

The one silver lining for Turkey’s economy is that the crumbling lira has boosted exports while making imports prohibitively expensive for many people. Even before the currency’s latest rout, Turkey registered two straight months of current account surpluses in August and September — a rare feat for a country so heavily dependent on imports. Meanwhile, Erdogan, who maintains de facto control of Turkey’s central bank, continues to dig in his heels over interest rate policy, as the Guardian reports:

[…] Recep Tayyip Erdoğan’s declaration of an “economic war of independence” has pitched him against many in his own party and the country’s technocrats who fear an inflation rate running at 20% will create further bouts of social unrest.

“Some people who wanted to convey the opinion to the president that a different policy should be followed were not successful in this,” a senior official in the ruling AK party told Reuters, requesting anonymity.

Three central bank governors who stood against Erdoğan’s demand for lower interest rates have been sacked since mid-2019, leaving the way clear for the governor since March, Şahap Kavcıoğlu, to bring down the base rate in three separate cuts from 19% to 15%.

Reduced Exposure

Spanish banks have by far the highest loan exposure to Turkey, with just under $63 billion of loans outstanding, followed by France ($26 billion), Germany ($14 billion) and Italy ($6 billion), according to recent data from the Bank of International Settlements. The good news for the ECB is that some Eurozone banks with large-scale operations in Turkey have pared back their exposure to the country, or at least not added to it, since 2018.

Italian megabank Unicredit has sold down its stake in the commercial bank Yapi Kredi from 40% in 2018 to around 20% today. Under a strategy aimed at offloading non-core assets, the bank’s current business plan envisages achieving zero contribution from Yapi by the end of 2023. Nonetheless Yapi Kredi will still contribute around 5% of group earnings in 2021, according to estimates by Citi analysts.

French giant BNP Paribas operates various businesses in Turkey, from retail banking to leasing and insurance through a string of subsidiaries. But the country accounts for a low single-digit contribution to BNP profits, according to Jeffries. What’s more, BNP claims that most of its Turkish business is self-financed.

Another European bank with operations in Turkey is the Dutch group ING but its exposure is also limited. In 2020 it generated a total income of 420 million euros in the country, making it the Dutch bank’s third biggest market outside Europe after the United States and Australia. Assets in Turkey stood at around 7.3 billion euros in 2020, or less than 1% out of a total of 937 billion euros.

Bucking the Trend

There is one big exception to this trend: Spain’s second largest lender, BBVA. In 2020, Turkey was BBVA’s third largest market after Mexico and Spain, providing €563 million of net attributable profit, up 41% from 2019. That represents 14.3% of BBVA profits, excluding the corporate centre.

Until two weeks ago, BBVA owned just under 50% of Turkey’s second largest private bank, Garanti, for which it had paid €6.9 billion in incremental purchases beginning in 2010. Since then the Lira has done nothing but fall. Garanti’s market cap as of two weeks ago, converted into euros, was €3.7 billion (it is now €3.3 billion). BBVA’s 49.85% stake in it was worth €1.85 billion. In other words, BBVA had lost 73% of its investment.

But instead of cutting back its exposure to Turkey, BBVA has doubled it. Flush with cash after selling its U.S. subsidiary to PNC last year, BBVA announced two weeks ago — just days before Turkey’s central bank cut interest rates for the third time, triggering the lira’s worst daily collapse in 20 years — plans to buy the rest of Garanti for the price of TL12.20 per share. The move amounts to a massive gamble Turkey’s Erodgan-dominated economy and has found little favour among investors. Since the day of the purchase BBVA’s shares have fallen almost 20% while Garanti’s are now below the takeover price.

“It was our best investment option,” said BBVA’s CEO, Onur Genç, on in an investor call on Monday aimed at allaying shareholders’ concerns. The Spanish lender sees its purchase of Garanti as a long-term proposition that cements its position in a high-growth market it already knows well — and what’s more at a bargain price! Genç, himself of Turkish descent, said even the recent decline of the lira, which has decimated Garanti’s market value, was beneficial to BBVA since it meant that its offer price for Garanti, converted into euros, has fallen from €2.25 billion on the day BBVA announced its offer, to €1.8 billion today. At the same time, the amount of capital committed has fallen from €1.4 billion to €1.2 billion.

But while the collapsing lira may mean that BBVA is getting a cheaper and cheaper deal as each day goes by, it could still end up paying dearly. As a Reuters Breaking Views article cross-posted in El País points out, the crisis could hurt Garanti in two ways:

First, a weaker lira makes it harder for borrowers to service dollar-denominated debt, increasing the risk of defaults. Garanti has reduced its foreign currency exposure much faster than other banks, but at $11.6 billion (€ 10.3 billion), it is still almost a third of total loans. Second, the unorthodox monetary easing raises the prospect of a sharp rise in rates at some point in the future. That would reduce loan margins, as deposits instantly become more expensive while loans take longer to appreciate.

But BBVA’s CEO is for the moment nonplussed, or at least appears to be. “Since the beginning,” he said, “we have been aware of the risks and have controlled for them in multiple ways.” One prime example is the way BBVA has set up its global business to limit the spread of financial wildfires from Turkey or other emerging markets to the wider group, as a Bloomberg article recently pointed out (comment in parenthesis my own):

As a legacy from the Argentine debt crisis of the late 1990s, the bank uses a model of self-sufficient subsidiaries, which insulates other units if one of its businesses runs into trouble. That means that if Garanti were to start failing, it could be liquidated or restructured without affecting the rest of the group. In a worst case, BBVA would risk the value of its equity stake in Garanti — currently just under $4 billion.

In other words, BBVA would simply walk away from the smouldering wreckage as well as Turkey as a whole — at least in theory. The one thing the Bloomberg article doesn’t mention is that BBVA’s silo-based damage control system has never been properly road tested before.

Tyler Durden Wed, 12/01/2021 - 06:30

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International

Riley Gaines Explains How Women’s Sports Are Rigged To Promote The Trans Agenda

Riley Gaines Explains How Women’s Sports Are Rigged To Promote The Trans Agenda

Is there a light forming when it comes to the long, dark and…

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Riley Gaines Explains How Women's Sports Are Rigged To Promote The Trans Agenda

Is there a light forming when it comes to the long, dark and bewildering tunnel of social justice cultism?  Global events have been so frenetic that many people might not remember, but only a couple years ago Big Tech companies and numerous governments were openly aligned in favor of mass censorship.  Not just to prevent the public from investigating the facts surrounding the pandemic farce, but to silence anyone questioning the validity of woke concepts like trans ideology. 

From 2020-2022 was the closest the west has come in a long time to a complete erasure of freedom of speech.  Even today there are still countries and Europe and places like Canada or Australia that are charging forward with draconian speech laws.  The phrase "radical speech" is starting to circulate within pro-censorship circles in reference to any platform where people are allowed to talk critically.  What is radical speech?  Basically, it's any discussion that runs contrary to the beliefs of the political left.

Open hatred of moderate or conservative ideals is perfectly acceptable, but don't ever shine a negative light on woke activism, or you might be a terrorist.

Riley Gaines has experienced this double standard first hand.  She was even assaulted and taken hostage at an event in 2023 at San Francisco State University when leftists protester tried to trap her in a room and demanded she "pay them to let her go."  Campus police allegedly witnessed the incident but charges were never filed and surveillance footage from the college was never released.  

It's probably the last thing a champion female swimmer ever expects, but her head-on collision with the trans movement and the institutional conspiracy to push it on the public forced her to become a counter-culture voice of reason rather than just an athlete.

For years the independent media argued that no matter how much we expose the insanity of men posing as women to compete and dominate women's sports, nothing will really change until the real female athletes speak up and fight back.  Riley Gaines and those like her represent that necessary rebellion and a desperately needed return to common sense and reason.

In a recent interview on the Joe Rogan Podcast, Gaines related some interesting information on the inner workings of the NCAA and the subversive schemes surrounding trans athletes.  Not only were women participants essentially strong-armed by colleges and officials into quietly going along with the program, there was also a concerted propaganda effort.  Competition ceremonies were rigged as vehicles for promoting trans athletes over everyone else. 

The bottom line?  The competitions didn't matter.  The real women and their achievements didn't matter.  The only thing that mattered to officials were the photo ops; dudes pretending to be chicks posing with awards for the gushing corporate media.  The agenda took precedence.

Lia Thomas, formerly known as William Thomas, was more than an activist invading female sports, he was also apparently a science project fostered and protected by the athletic establishment.  It's important to understand that the political left does not care about female athletes.  They do not care about women's sports.  They don't care about the integrity of the environments they co-opt.  Their only goal is to identify viable platforms with social impact and take control of them.  Women's sports are seen as a vehicle for public indoctrination, nothing more.

The reasons why they covet women's sports are varied, but a primary motive is the desire to assert the fallacy that men and women are "the same" psychologically as well as physically.  They want the deconstruction of biological sex and identity as nothing more than "social constructs" subject to personal preference.  If they can destroy what it means to be a man or a woman, they can destroy the very foundations of relationships, families and even procreation.  

For now it seems as though the trans agenda is hitting a wall with much of the public aware of it and less afraid to criticize it.  Social media companies might be able to silence some people, but they can't silence everyone.  However, there is still a significant threat as the movement continues to target children through the public education system and women's sports are not out of the woods yet.   

The ultimate solution is for women athletes around the world to organize and widely refuse to participate in any competitions in which biological men are allowed.  The only way to save women's sports is for women to be willing to end them, at least until institutions that put doctrine ahead of logic are made irrelevant.          

Tyler Durden Wed, 03/13/2024 - 17:20

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Government

Mike Pompeo Doesn’t Rule Out Serving In 2nd Trump Administration

Mike Pompeo Doesn’t Rule Out Serving In 2nd Trump Administration

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Former Secretary…

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Mike Pompeo Doesn't Rule Out Serving In 2nd Trump Administration

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Former Secretary of State Mike Pompeo said in a new interview that he’s not ruling out accepting a White House position if former President Donald Trump is reelected in November.

“If I get a chance to serve and think that I can make a difference ... I’m almost certainly going to say yes to that opportunity to try and deliver on behalf of the American people,” he told Fox News, when asked during a interview if he would work for President Trump again.

I’m confident President Trump will be looking for people who will faithfully execute what it is he asked them to do,” Mr. Pompeo said during the interview, which aired on March 8. “I think as a president, you should always want that from everyone.”

Then-President Donald Trump (C), then- Secretary of State Mike Pompeo (L), and then-Vice President Mike Pence, take a question during the daily briefing on the novel coronavirus at the White House in Washington on April 8, 2020. (Mandel Ngan/AFP via Getty Images)

He said that as a former secretary of state, “I certainly wanted my team to do what I was asking them to do and was enormously frustrated when I found that I couldn’t get them to do that.”

Mr. Pompeo, a former U.S. representative from Kansas, served as Central Intelligence Agency (CIA) director in the Trump administration from 2017 to 2018 before he was secretary of state from 2018 to 2021. After he left office, there was speculation that he could mount a Republican presidential bid in 2024, but announced that he wouldn’t be running.

President Trump hasn’t publicly commented about Mr. Pompeo’s remarks.

In 2023, amid speculation that he would make a run for the White House, Mr. Pompeo took a swipe at his former boss, telling Fox News at the time that “the Trump administration spent $6 trillion more than it took in, adding to the deficit.”

“That’s never the right direction for the country,” he said.

In a public appearance last year, Mr. Pompeo also appeared to take a shot at the 45th president by criticizing “celebrity leaders” when urging GOP voters to choose ahead of the 2024 election.

2024 Race

Mr. Pompeo’s interview comes as the former president was named the “presumptive nominee” by the Republican National Committee (RNC) last week after his last major Republican challenger, former South Carolina Gov. Nikki Haley, dropped out of the 2024 race after failing to secure enough delegates. President Trump won 14 out of 15 states on Super Tuesday, with only Vermont—which notably has an open primary—going for Ms. Haley, who served as President Trump’s U.S. ambassador to the United Nations.

On March 8, the RNC held a meeting in Houston during which committee members voted in favor of President Trump’s nomination.

“Congratulations to President Donald J. Trump on his huge primary victory!” the organization said in a statement last week. “I’d also like to congratulate Nikki Haley for running a hard-fought campaign and becoming the first woman to win a Republican presidential contest.”

Earlier this year, the former president criticized the idea of being named the presumptive nominee after reports suggested that the RNC would do so before the Super Tuesday contests and while Ms. Haley was still in the race.

Also on March 8, the RNC voted to name Trump-endorsed officials to head the organization. Michael Whatley, a North Carolina Republican, was elected the party’s new national chairman in a vote in Houston, and Lara Trump, the former president’s daughter-in-law, was voted in as co-chair.

“The RNC is going to be the vanguard of a movement that will work tirelessly every single day to elect our nominee, Donald J. Trump, as the 47th President of the United States,” Mr. Whatley told RNC members in a speech after being elected, replacing former chair Ronna McDaniel. Ms. Trump is expected to focus largely on fundraising and media appearances.

President Trump hasn’t signaled whom he would appoint to various federal agencies if he’s reelected in November. He also hasn’t said who his pick for a running mate would be, but has offered several suggestions in recent interviews.

In various interviews, the former president has mentioned Sen. Tim Scott (R-S.C.), Texas Gov. Greg Abbott, Rep. Elise Stefanik (R-N.Y.), Vivek Ramaswamy, Florida Gov. Ron DeSantis, and South Dakota Gov. Kristi Noem, among others.

Tyler Durden Wed, 03/13/2024 - 17:00

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Government

RFK Jr. Reveals Vice President Contenders

RFK Jr. Reveals Vice President Contenders

Authored by Jeff Louderback via The Epoch Times,

New York Jets quarterback Aaron Rodgers and former…

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RFK Jr. Reveals Vice President Contenders

Authored by Jeff Louderback via The Epoch Times,

New York Jets quarterback Aaron Rodgers and former Minnesota governor and professional wrestler Jesse Ventura are among the potential running mates for independent presidential candidate Robert F. Kennedy Jr., the New York Times reported on March 12.

Citing “two people familiar with the discussions,” the New York Times wrote that Mr. Kennedy “recently approached” Mr. Rodgers and Mr. Ventura about the vice president’s role, “and both have welcomed the overtures.”

Mr. Kennedy has talked to Mr. Rodgers “pretty continuously” over the last month, according to the story. The candidate has kept in touch with Mr. Ventura since the former governor introduced him at a February voter rally in Tucson, Arizona.

Stefanie Spear, who is the campaign press secretary, told The Epoch Times on March 12 that “Mr. Kennedy did share with the New York Times that he’s considering Aaron Rodgers and Jesse Ventura as running mates along with others on a short list.”

Ms. Spear added that Mr. Kennedy will name his running mate in the upcoming weeks.

Former Democrat presidential candidates Andrew Yang and Tulsi Gabbard declined the opportunity to join Mr. Kennedy’s ticket, according to the New York Times.

Mr. Kennedy has also reportedly talked to Sen. Rand Paul (R-Ky.) about becoming his running mate.

Last week, Mr. Kennedy endorsed Mr. Paul to replace Sen. Mitch McConnell (R-Ky.) as the Senate Minority Leader after Mr. McConnell announced he would step down from the post at the end of the year.

CNN reported early on March 13 that Mr. Kennedy’s shortlist also includes motivational speaker Tony Robbins, Discovery Channel Host Mike Rowe, and civil rights attorney Tricia Lindsay. The Washington Post included the aforementioned names plus former Republican Massachusetts senator and U.S. Ambassador to New Zealand and Samoa, Scott Brown.

In April 2023, Mr. Kennedy entered the Democrat presidential primary to challenge President Joe Biden for the party’s 2024 nomination. Claiming that the Democrat National Committee was “rigging the primary” to stop candidates from opposing President Biden, Mr. Kennedy said last October that he would run as an independent.

This year, Mr. Kennedy’s campaign has shifted its focus to ballot access. He currently has qualified for the ballot as an independent in New Hampshire, Utah, and Nevada.

Mr. Kennedy also qualified for the ballot in Hawaii under the “We the People” party.

In January, Mr. Kennedy’s campaign said it had filed paperwork in six states to create a political party. The move was made to get his name on the ballots with fewer voter signatures than those states require for candidates not affiliated with a party.

The “We the People” party was established in five states: California, Delaware, Hawaii, Mississippi, and North Carolina. The “Texas Independent Party” was also formed.

A statement by Mr. Kennedy’s campaign reported that filing for political party status in the six states reduced the number of signatures required for him to gain ballot access by about 330,000.

Ballot access guidelines have created a sense of urgency to name a running mate. More than 20 states require independent and third-party candidates to have a vice presidential pick before collecting and submitting signatures.

Like Mr. Kennedy, Mr. Ventura is an outspoken critic of COVID-19 vaccine mandates and safety.

Mr. Ventura, 72, gained acclaim in the 1970s and 1980s as a professional wrestler known as Jesse “the Body” Ventura. He appeared in movies and television shows before entering the Minnesota gubernatorial race as a Reform Party headliner. He was a longshot candidate but prevailed and served one term.

Former pro wrestler Jesse Ventura in Washington on Oct. 4, 2013. (Brendan Smialowski/AFP via Getty Images)

In an interview on a YouTube podcast last December, Mr. Ventura was asked if he would accept an offer to run on Mr. Kennedy’s ticket.

“I would give it serious consideration. I won’t tell you yes or no. It will depend on my personal life. Would I want to commit myself at 72 for one year of hell (campaigning) and then four years (in office)?” Mr. Ventura said with a grin.

Mr. Rodgers, who spent his entire career as a quarterback for the Green Bay Packers before joining the New York Jets last season, remains under contract with the Jets. He has not publicly commented about joining Mr. Kennedy’s ticket, but the four-time NFL MVP endorsed him earlier this year and has stumped for him on podcasts.

The 40-year-old Rodgers is still under contract with the Jets after tearing his Achilles tendon in the 2023 season opener and being sidelined the rest of the year. The Jets are owned by Woody Johnson, a prominent donor to former President Donald Trump who served as U.S. Ambassador to Britain under President Trump.

Since the COVID-19 vaccine was introduced, Mr. Rodgers has been outspoken about health issues that can result from taking the shot. He told podcaster Joe Rogan that he has lost friends and sponsorship deals because of his decision not to get vaccinated.

Quarterback Aaron Rodgers of the New York Jets talks to reporters after training camp at Atlantic Health Jets Training Center in Florham Park, N.J., on July 26, 2023. (Rich Schultz/Getty Images)

Earlier this year, Mr. Rodgers challenged Kansas City Chiefs tight end Travis Kelce and Dr. Anthony Fauci to a debate.

Mr. Rodgers referred to Mr. Kelce, who signed an endorsement deal with vaccine manufacturer Pfizer, as “Mr. Pfizer.”

Dr. Fauci served as director of the National Institute of Allergy and Infectious Diseases from 1984 to 2022 and was chief medical adviser to the president from 2021 to 2022.

When Mr. Kennedy announces his running mate, it will mark another challenge met to help gain ballot access.

“In some states, the signature gathering window is not open. New York is one of those and is one of the most difficult with ballot access requirements,” Ms. Spear told The Epoch Times.

“We need our VP pick and our electors, and we have to gather 45,000 valid signatures. That means we will collect 72,000 since we have a 60 percent buffer in every state,” she added.

The window for gathering signatures in New York opens on April 16 and closes on May 28, Ms. Spear noted.

“Mississippi, North Carolina, and Oklahoma are the next three states we will most likely check off our list,” Ms. Spear added. “We are confident that Mr. Kennedy will be on the ballot in all 50 states and the District of Columbia. We have a strategist, petitioners, attorneys, and the overall momentum of the campaign.”

Tyler Durden Wed, 03/13/2024 - 15:45

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