The Turkish cabinet reviews fund crisis and plans new measures

⑴ The cabinet of Turkish President Erdogan will discuss the country’s fund crisis on Monday.⑵ It is expected that Finance Minister Simsek will brief cabinet members on the progress of relevant investigations, as well as measures to prevent similar turmoil from happening again.⑶ According to the Turkish Presidency, the meeting will assess the latest developments, and review the work carried out by government agencies regarding possible legal and administrative adjustments.⑷ Simsek stated on Monday that the government will continue to take necessary actions, including providing liquidity to the market, to prevent the crisis from spreading to the financial system and the real economy.⑸ During this month’s turmoil in the investment markets, a large number of redemption requests led some fund management institutions to be unable to meet investors’ withdrawal demands. Regulators subsequently ordered the liquidation of 131 funds, involving more than 455,000 individual investors.⑹ As part of the investigation, authorities have arrested or detained a number of senior executives in the financial industry.⑺ From a market perspective, liquidity support and regulatory adjustments may help stabilize in the short term, but the large scale of fund liquidation could affect investor confidence. The follow-up will require attention on the outcome of the cabinet meeting, the performance of lira assets, and the risk of transmission within the financial system.