Halkbank says Iran dealings 'entirely lawful'

Halkbank's Iranian business ties had drawn Western disapproval amid US-led efforts to curb Tehran's disputed nuclear program. Erdoğan described the police crackdown on the bank and a wider investigation last week as a foreign-engineered "dirty operation" against him.

Turkey has bought natural gas and oil from Iran through an indirect system whereby Iranian exporters received payment in Halkbank lira accounts and used that money to buy gold. The bulk of that gold was then shipped from Turkey to Dubai, where Iran could import it or sell it for foreign currency. In a filing with the İstanbul stock exchange, Halkbank said it had complied with the law in its business with Iran. "There was no domestic or international rule or ban that prevented the sale of precious metals to Iran up until July 1, 2013," the bank said in a statement, adding that it had stopped such transactions as of June 10. Halkbank had also been processing a portion of India's payments for Iranian oil. "The source of the funds used in these transactions and the parties to this trade are open, transparent and traceable in the system," it said in the statement. Halkbank Chief Executive Süleyman Aslan and the sons of two cabinet ministers are in custody in connection with the corruption inquiry. Erdoğan responded by sacking or reassigning some 70 police officers, including the head of İstanbul's force.

The scandal has fueled anti-government protests and shaken the strong Turkish economy that helped keep Erdoğan in power.

Deputy PM: Halkbank lost $1.62 bln in market value

Turkish Deputy Prime Minister Ali Babacan said on Sunday that the latest allegations of corruption against Halkbank have trimmed the bank's $1.62 billion market value. The bank's shares traded on Bourse İstanbul (BİST) nosedived, and a week-long losing streak caused even more investors to exit the Halkbank shares. Halkbank shares were down 1.52 percent at Monday's morning session.

The deputy prime minister places the total loss in market value of Turkish firms traded on BİST at as high as $20 billion. “We are afraid the police investigation was aimed at harming the atmosphere of political and economic stability inside Turkey. Our government is committed to uncovering corruption in public and private institutions,” Babacan asserted.

Babacan's comments arrived amid the purging of dozens of police officials along with the head of the state communications office. Observers are accusing the government of trying to cover up the alleged scandals. On Monday, the Turkish Bar Association (TBB) demanded the Council of State cancel a government decree issued late on Friday night requiring police chiefs to notify their superiors of any investigation launched by prosecutors.

Halkbank's market value dropped from $9.5 billion to $7.87 billion in a week while all Turkish firms traded on the BİST saw their total market value fall to $249 billion from $269 billion in the same period.