Türkiye rules out Treasury funding for investment fund losses

Vice President Cevdet Yilmaz said on Wednesday that Türkiye will not deploy Treasury resources to cover private losses incurred by investment funds currently undergoing liquidation, stressing that the financial system faces no systemic risk despite 131 funds representing 4.6 percent of the total market being affected.

Addressing lawmakers in parliament regarding the Fund Coordination Board he chairs, Yilmaz outlined the scope of the issue, noting that the funds under liquidation account for 7.7 percent of combined portfolio value and equal 2.4 percent of household financial assets as of Oct. 5. "In other words, the problem has occurred in a limited segment of the fund market," he said.

Yilmaz said that distributing available resources proportionately to investors' holdings represents the general legal principle governing liquidation, with interim principal repayments of up to 1 million Turkish liras ($20,326) planned for funds subject to extraordinary liquidation. "Treasury resources will not be used for private losses arising during this process," he said, adding that investment funds — particularly high-risk hedge funds — do not carry the state guarantee applicable within the banking system.

The repayment structure prioritizes small investors and money market funds, utilizing existing fund assets first before supplementing with resources recovered from those obtaining excessive or unjust gains and proceeds from sales of assets removed from the system, according to the vice president's briefing. Authorities will liquidate existing assets before pursuing recovery from parties who obtained unjust gains.

Investigations and preventive measures

Judicial and administrative authorities are examining the cases, with those responsible for unlawful gains through speculation and manipulation to be held accountable, Yilmaz said. The State Supervisory Council has deployed 10 inspectors to review the responsibilities of relevant institutions and independent regulators, he added.

Authorities are evaluating administrative and legal measures to prevent similar problems, with the coordination board establishing a roadmap for institutions to take steps within their mandates. Yilmaz pledged transparent, fair and speedy liquidation, reaffirming Türkiye's commitment to expanding and deepening capital markets.