How will investors get their money back in the fund crisis? A striking response from a banker who spoke to Fatih Altaylı

Following the suspension of transactions in 131 funds belonging to 7 companies by order of the Capital Markets Board (SPK), uncertainty regarding investors' claims continues. In the process that began with the appointment of Türkiye İş Bankası and Ziraat Bankası for the liquidation of the funds, the rate at which payments will be made has become one of the most curious topics.

It was announced that the liquidation program is aimed to be completed within three months in the crisis, which is stated to involve over 500 thousand investors and approximately 900 billion liras of locked assets. Journalist Fatih Altaylı shared assessments he obtained from banking sector sources in an article on his personal website.

BANKS WILL ACT LIKE A LIQUIDATION DESK

According to Altaylı, the appointed banks are expected to first examine the assets within the acquired funds, convert them into cash based on the market values that will emerge, and then make payments to the rightful owners. It is stated that carrying out the process over time could prevent panic selling and reduce investor losses.

The banking source Altaylı stated he spoke with pointed out that there is no state guarantee for these funds similar to deposits in banks. For this reason, it was emphasized that the banks will not undertake the obligation to cover all the assets in the funds; the amount obtained from the sales will be distributed among the rightful owners.

I can say that anyone who gets 10 percent of the money they put in is considered lucky. Because the banks will not have an obligation to repay all of this money. They will act like a kind of liquidation desk.

Altaylı stated that identifying real small investors will be one of the critical stages of the process. According to the assessment, the accurate separation of rightful owners could affect the level to which repayments compensate for losses; however, the current picture indicates that it may be difficult for investors to recover all of their claims.

The relevant part of Altaylı's article is as follows:

 "So, what happens next?

In other words, how will the claims loaded onto Ziraat Bankası and İş Bankası be paid?

Yesterday, I was with a doyen of Turkey's banking sector.

He asked me, “Fatih, what is happening, what is this fund issue?”

I laughed, and I asked him, “What is this fund issue?”

As if neither of us knew.

“We had talked before about these blowing up somewhere. Everyone already knew it anyway,” he said.

He was right. Everyone knew.

“What will the banks do, how will they get out from under this burden?” I asked my banker friend.

“Actually, transferring this business to banks is absurd, but they must have found such a formula reasonable so that there would be no social trouble. You can think of it as putting an obstacle in front of a tsunami,” he said and explained how the system could work.

“Banks will look at the assets within the funds they have taken over. They will convert these into cash based on the market value that will emerge now and start making payments to the rightful owners accordingly. If they are allowed to do this slowly after the panic atmosphere passes, the investors' losses will be less. Of course, they will also have the trouble of determining who is a real investor and who is not. They will solve the problem by spreading it over time. I am not sure if this is the right thing, but it is the reasonable thing.”

So, will everyone who invested money here get their money back?

My banker friend's answer is important.

“The more successful they are in finding and weeding out the real small investors, the more the amount the rightful owners receive will compensate for their losses. However, there is no state guarantee here as there is in banks. In this case, the remaining money after the sales is distributed. I can say that anyone who gets 10 percent of the money they put in is considered lucky. Because the banks will not have an obligation to repay all of this money. They will act like a kind of liquidation desk.”