Turkish Banking Sector - Brigands of the Information Highway

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component of the kind macro-analytic of work that nee sd be done in the near future by those of us committed to piercing the veil of the ‘opaque world o gol 'd!

Now back to our story! The campaign of taking gold ‘out from under the pillows’ was kicked off in 2011 via proposed legislation in the Turkish parliament to amend the laws governing the banking sector and gold. Accompanying this was the opening of an advertising blitz by the banks themselves, announcing a new category of gold accounts, gold loans, and buying and selling of

by product physical the

a sector of the economy which had previously been limited to dealing in financial debt instrument ofs . variety paper the What caught my attention at the time was the flurry of stories that came out in the press describing the details of the campaign. In

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Living far away from their nearest branch, this was hardly convenient for me. What I had hoped would be a full service solution to my financial needs had turned out to be a dead end.

M Note: y attention was flagged this past week by reading the newly released WGC – which stated that Kuvyet Bank is doing direct, over the counter gold sales in all their branches. Part of the delay in getting this segment finished came from my deciding to visit a branch of the bank this week to see how things really stood. I’ll write more about the results of that visit in Four Part necessary now the !

Later that year, having not found a perfect solution to my needs, I was muchly interested in the media accounts

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“Banks are competing to attract gold with a variety of products. Isbank and Turkiye Garanti Bankasi AS (GARAN), the country’s biggest lender by market value, offer gold-backed loans, where customers can bring jewelry or coins to the bank and take out loans against their value. Garanti also has a credit card linked to gold deposit accounts. The bank said it soon will enable customers to withdraw their savings in gold, instead of Turkish lira or foreign exchange"

which greatly encoura dge my hope that something could yet be made out of the raft of promises being issued. I went directly to my local Garanti branch to survey the territory. Imagine my surprise when the branch told me they knew nothing of this scheme, neither the gold in or the loans out parts. The same XAU virtual gold account was all that they offered, like other competing Turkish banks. When I also checked with the local Isbank I discovered that they too, knew nothing about their purported gold arrangements. Tracking down the author of the piece, an Istanbul-based Bloomberg reporter, I inquired as to the gap between her story and the on the ground reality. I was confident that the reporter would be keen to follow up on the mystery. Instead I got this perfunctory reply which was clearly designed to signal an end to this line of enquiry -

Dear Sir/Madam, I have received the information directly from the banks themselves, the deputy CEO's for personal banking. As it has been delivered to me in writing, I have written proof that this is so. I do not know who you have talked to, but maybe they were not aware of these products? I hope this was helpful and thank you for your interest and concer .n

Combine that anomaly with reporters decidedly disinterested in fact checking their own flawed stories… retail businesses with a studied disinclination to communicating with their own clients, and this was all beginning to look ominously opaque to me!

It wasn’t long before these domestic stories were picked up by the precious metals media in the West, Goldcore for example giving a summation of it in their daily dispatches that turn up on sites like Zerohedge and SilverDoctors. While the spin component of the story was heavily in evidence , one piece on ZeroHedge did a pretty good job at cutting through the smoke and mirrors to get at what was behind it all. To add some local color, I commented at the time…

Turkey is in the midst of a major credit expansion, the current generation of mindless consumers is encouraged to mortgage the family property in order to show the neighbors how high livin they are. Not a lot different than in Greece, Italy, or wherever, the human

Stymied,

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- everywhere encountered situation the with conformity in all was this say, to fashion. friendly a in always - add might I not, - stonewalled

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propensity to consume more than they produce is encouraged and abetted to the long term detriment of all. I watch my neighbors ride their motorbikes to the field, to collect the cows, Walking is unheard of. That's with gasoline north of $12.00 /gal and rising. People are fat, unfit, and worn out by the age of forty.

Everybody, however, from the poorest goat herder to the grandees in Stanbul holds a sizeable part of their wealth in physical(gold-silver is almost unknown)

Generally though, the way this story was spun by GoldCore and western news outlets was either as an encouraging sign of golds’ inherent quality as true wealth bein g acknowledged

by government and the financial sector, or

variously, as a harbinger of confiscations to come. The confusion endemic to these mixed messages can be seen in this next example from

in SilverDoctors.com, 2012 – "Turkish banks are now offering customers the ability to use their gold based deposits for collateral on gold backed loans and others are allowing access to Turkish Lira or for access to credit cards. Isbank and Turkiye Garanti Bankasi AS, the country’s biggest lender by market value, offer gold-backed loans, where customers can bring jewellery or coins to the bank and take out loans against their value. Garanti also has a credit card linked to gold deposit accounts. Government efforts to help ease the nation’s current account deficit are encouraging householders to bring their gold coins which it is estimated that there are $302 billion of hidden gold stashed in homes.

This hidden gold is second only to the US, and Turkish gold based deposit accounts have grew 15% this year calculated until the end of July, which is a 3 fold increase in standard savings accounts according to the Turkish Central Bank. The gold accounts give customers an amount in Turkish lira equivalent to the weight of the precious metal they deposit in the bank. Bank customers can then withdraw cash or take out loans, while the bank is able to sell or hold onto the gold ".

The same article went on to speak of customers being able to “use their gold as ' collateral’ for a loan ', and then specified that the bank ‘is able to sell’ or hold on to the gold – the customers claim on their (former)asset being redeemed lira ! only The careful reader will have noticed the two claims are contradictory… both cannot be true! Collateral is an asset held in trust as security – redeemable according to conditions of a contract. It remains in title of the owner subject to forfeit in event of

default on the debt. Banks can only process and sell off gold that belongs to them ... NOT to the former owners and present bagholders! It should be clear as to all where legal title lies in this matter – yet it has been made clear as mud by all concerned – the media, the banks hemselves, t

and the authorities responsible for overseeing commercial

practice. It was rather more surprising, however, that these kind of troubling contradictions would be passed over by the western-based “alternative media” sites which commonly skew their reportage to interpretations favoring only the most bullish possible slant to any news story . What would presumably be the role of media outlets positive towards gold – to filter and detect disinformation – was, and has continued to be, totally absent. When it comes to this story of immense importance to the fate of gold and its’ pricing prospects, in other words, there are no vigilant pro-gold parties guarding the henhouse, just as there are no governmental authorities supervising the bad faith marketing of the banks!

And therefore, the most egregious examples of false stories, misleading advertising, and betrayals of public trust have been openly foisted upon a public that incautiously believed that their press, government and financiers would never lie to them!

You might suppose that the string of falsehoods perpetrated by all these parties would create a widespread questioning, … or at least public comment in a population being encouraged to divest itself of its’ real wealth in less than forthright fashion . Unfortunately, you might have also expected that a false flag attack on Americas’ iconic WTC which disguised a

gigantic gold robbery from the basement of demolished WTC might provoke something of the same! But t ath is not the kind of world that we live in… t ish new world of spin-doctored virtual realities is apparently as potent in its’ distorting effect in the emerging nations of Asia as it is in the western world. Beguiled by television, print media, and internet hype, Turkish consumers appear to be every bit as susceptible to the blandishments of an advertising age that has refined the methods used in hollowing out truth until it bea sr but passing resemblance to itself!

Suffice it to say that 2012 and 2013 saw a considerable amount of success accrue to this campaign of the banks.

“At Yapi Kredi Bankasi AS (YKBNK), owned by UniCredit SpA (UCG) and Koc Holding AS (KCHOL), deposits in gold-based mutual funds, which invest at least 51 percent of their money in precious metals and offer a guaranteed return on capital, increased 62 percent in 2012. Turkiye Is Bankasi AS (ISCTR), Turkey’s largest bank by assets, said gold deposits increased 10-fold in the two years through June.”(from the same Bloomberg report quoted above).

nd A as Reuters reported it in 2012

There are no reliable statistics for how much the flow of gold to jewellers has declined because of the banks' marketing push. But an indication can be seen in data from the banking watchdog which shows total gold deposits at Turkish banks soared to 15.6 billion lira ($8.6 billion) in April from 3.73 billion lira a year earlier.

What we’ve seen so far has been a birds’ eye view of the push to get people in Turkey to trade in their real gold for “products” that are marketed as being of equal or better exchange value – or to place it in the “safekeeping” of others in order to employ it as security from which liquidity can be drawn at no risk to the underlying asset. It’s now time to take an up close look at the way one bank in particular has played this game of shells – via the

all! it of bottom the to get finally to order in - present the to 2012 from conducted personally I which transactions of series

Intent on penetrating the foggy murk imposed on a subject of personal interest to me, I cashed out some of the “gold grams” from my Yapi Kredi “GOLD ACCOUNT”, and bought more Ziynets at the jewelers in late 2012. Taking them with me when Garanti had a ‘gold collection day’ at a nearby branch, I handed them over to an assayer at a desk, agreed on the exchange value, and with this balance, arranged to receive a ‘Gold’ credit card backed with my ‘gold grams’ at a ratio of 1:1.5 – in other words a 5000 limit backed with 7500 xau of gold…and a ‘gold loan’ similarly secured…. repayable in installments like a normal bank loan. With the gold held in my Garanti account, as small amount of interest would accrue, and with the purchases made on my card, an amount of ‘gold

points’ would accrue – redeemable in real grams at Atasay jewelers- according the the Bonus Gold card program description! Papers signed and exchanges made, I was finally in a position to understand -I thought, how the Gold-backed system really worked! I had traded my ‘real’ gold ziynets for some ledger book credits which allowed me access to a credit card with the usual (28%)interest features, and an amount of lira on which it was expected that I would pay an equally extortionate amount of interest – in fact, the same amount as on any ‘non-secured’ credit approved loan. My alleged ‘collateral’ gone, and to top it off, usurious interest rates for the privilege of having access to

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Time to review the features of the Garanti Bank gold offers as presented – and contrast them with the ground level reality encountered

All of this chicanery, conducted by what is said to be the biggest privately held bank in the country, reflects the policies in practice of all of the rest of the commercial banks operating gold schemes – with the one important exception I will detail in . Four Part

While I do not regret the experience gained by going to the considerable trouble of sussing out the truth about a scheme that seems to have been designed to mislead from the get go, I shake my head at my own credulity for having granted any trust at all to parties I knew to be innately suspect.

In defense of those whom I have cast in a pejorative light here, it ouldc beargued

that there were mitigating circumstances that partially excuse them.

The part of t ish story which did not reach outside the domestic press was that reaction on the part of the countries jewelers when the word got out about the banks’ intentions to eat their breakfast – lunch – and dinner!

With the government preparing legislation to allow the banks to trade in gold, the lobbying power of Turkeys 30,000 jewelry outlets was unleashed

use gold based deposits for collateral on gold backed loans

•DISCOVERABLE

only. lira in redeemable ountacc an in held grams’ ‘gold of amount an for entry ledger a issues which bank, the with remains bank the to sold Goldo

bring jewellery or coins to the bank and take out loans against their value •DISCOVERABLE•as above – gold assets traded in to the bank become property of the bank – not

the customer – who receives a loan secured by the ledger credits in an account which although secured – is charged the same amount of interest as is an unsecured loan.

a credit card linked to gold deposit accounts. •DISCOVERABLE•the only link to gold which the card holds is the picture of gold bars on the card

face, and the name of the program. It is a normal credit card in all ways, including the exorbitant annual usage fee and interest rate. The promised points were never delivered by the bank, and requests to have the accumulated gold points redeemed were ignored!

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account gold in name your in eldhbe to bank the togold acc an in held grams’ ‘gold of amount an forntry

in full fury. With their backs to the wall, the industry lobby pulled out every trick they had to stave off the damage – from threatening to pull the plug on banks card machines in their stores, to threatening the government with the mass layoffs that would occur in the event that stores were force out of business.

Partial success in this push back may be evidenced in what subsequently developed as a sort of stand-off. Though poorly documented in the media, circumstantial evidence would indicate that via some kind of agreement, the banks were restricted to buying gold, and not selling it. This may account for some of the gap between the initial promised two way trade, and the reality which developed. The jewelers agreed to back off with this compromise because some of their biggest members, like Atasay, cut deals to do the in branch assaying for certain banks. The prospect of attrition within their own ranks might have made them more malleable. As a result the State was able to continue to have its’ PTT postal outlets sell bars of small gram size IAR bars without further complaint from the jewelry lobby.

As we enter 2015, gold continues to play a critical role in the flows of government trade balances in the present moment – as this article shows -

and the spin doctors continue to inv keo many and various mantras to make the problem of Turke 'ys current accounts deficit ‘go away.’ For much of the time since the inception of the monetization of gold scheme, the country enjoyed an extraordinary interval of relief from this troubled relationship to gold, as the American embargo on Iran created that Oil for Gold Trade which would temporarily see Turkey become a major transit point for international gold flows. When that ended in 2013, the hangover would come in the form of a huge scandal involving government-owned Halk Bank, bribes and payoffs at the highest levels government, revelations of which would cost no less than 4 ministers their jobs – and the renewal of a chronic deficit problem and a war between the AKP apparatchiks and the non-partisan managers of the Central Bank over interest rates.

Many of Turkeys’ once buoyant consumers are now finding it harder and harder to make the adjustment to a less booming economy, and are turning to debt where once they might have floated through the tougher times with the savings that went into the banks in the form of gold and came out in the form of record debt levels! Where Turks once led almost all other countries in their savings, now they appear to lead only in indebtedness -

…hardly an enviable situatio .n It's one contributed heavily to by the folly of the leaders countries' in encouraging them to give up on the wiser traditions of previous generations of savvy peasantry for the bland assurances of the new be-spoke tailored aristocracy of the Istanbul financial & political

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