UPDATE 1-Turkey may lift lira transaction ban on foreign banks but investigation will continue -Anadolu

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ANKARA, May 10 (Reuters) - Turkey’s banking watchdog may lift a transaction ban it imposed on BNP Paribas, Citibank and UBS if they fulfil their lira liabilities but an investigation into the three banks will continue, its head said on Sunday according to the state-owned Anadolu news agency.

On Thursday, Anadolu reported Turkish regulators had launched legal actions against London-based financial institutions over allegations they bought large sums of foreign currency and then defaulted on Turkish lira liabilities to weaken the currency.

Shortly after, the BDDK banking watchdog said it had imposed a lira transaction ban on the three banks as they had not fulfilled their Turkish lira liabilities in time. It said then the ban would be maintained until further notice and would include transactions with the banned banks’ group banks operating in other countries.

UBS declined to comment on Thursday on the BDDK action and the Anadolu report. BNP and Citibank have not responded to Reuters’ requests for comment.

On Sunday, Anadolu quoted BDDK Chairman Mehmet Ali Akben as saying the ban may be lifted if the banks fulfilled their lira liabilities, but that an investigation would still continue.

“We will keep battling manipulation attempts in a determined way,” Akben was cited as saying. “If the banks in question then fulfil their liabilities, the transaction ban may be lifted. The investigation into whether the transactions of these three banks are exchange rate manipulation or not will continue and will be concluded,” he said.

Akben also defended a separate decision on Thursday to describe activities that were to be regarded as financial manipulation and deceptive transactions.

Concern was raised that the BDDK action could allow punishment of news outlets writing about the lira and other financial developments.

“The relevant parties for the BDDK ruling in question are (concerning) manipulative banking transactions,” Akben said. “Our institution has no aim to limit or block news reports and analyses regarding financial markets and assets.”

He said the BDDK’s actions during the coronavirus pandemic were aimed at limiting pressure on banks and providing them with more flexibility during this period, adding the regulations would go back to their previous state after the outbreak.

The BDDK’s move on Thursday to impose a lira transaction ban followed a sharp selloff in the lira, which weakened to a record low of 7.2690 to the U.S. dollar. The currency later steadied after rebounding from its losses and stood at 7.0795 against the U.S. dollar at Friday’s close. (Reporting by Tuvan Gumrukcu; Editing by Toby Chopra)