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Turkey's Regulator to Probe JPMorgan (JPM) Post Lira Slump

Zacks Equity Research

Triggered by the continued decline in the value of lira, Turkey’s banking regulator stated that it will conduct an inquiry into JPMorgan JPM. Turkey's Banking Regulation and Supervision Board alleged that the bank provided “misleading and manipulative” investment advice, which stimulated a run on the lira.

Supposedly, the regulator received a number of complaints against a research report that JPMorgan gave to clients. The regulator mentioned that the report “caused volatility in the financial markets and loss of reputation and value especially for the banks of our country.”

As a result, the lira fell more than 5% on Friday while Turkey's primary stock exchange declined 3.45%.

Notably, the board promised to undertake “necessary administrative and legal proceedings” against JPMorgan.

In fact, the board said that it would look into operations of other banks as well.

The economic and financial condition of Turkey has not been great over the past few years. The country has been facing currency issues of late. In fact, per president, Recep Tayyip Erdogan, foreign entities are responsible for the current financial condition of Turkey. He frequently blames foreign powers for stimulating the currency crisis in the country and recently accused unnamed actors in the financial sector for trying to instigate a run on the lira.

He stated, “We all know who you are, we all know what you are all doing. You should know that after the elections, we will make you to pay a heavy price. You would not be able to exploit this nation. You would not be able to cheat this nation.”

However, many economists differ from him. They feel that it is the rule of law, and a lack of confidence in the economy and not foreign actors that are responsible for the current turmoil in the nation.

JPMorgan’s concerns are not restricted to this. It has been facing other issues as well. Yesterday, the bank reported that it plans to move roughly 300 investment banking employees from the London office to other hubs in the European Union (EU) in case of a no-deal Brexit. It asked employees working in areas such as sales and risk to sign new contracts for relocating.

Britain’s exit from EU is now scheduled on May 22 if Prime Minister Theresa May's proposed withdrawal agreement receives approval from the parliament. Otherwise, Britain may offer new exit plan until Apr 12 or decide to leave without a deal.

Apart from JPMorgan, several financial institutions are preparing for Brexit. In February 2019, Barclays BCS revealed plans to shift some equity and credit derivative sales jobs to Paris as it revamps operations ahead of Brexit. Likewise, Bank of America BAC and HSBC Holdings HSBC began relocating jobs to Paris.

JPMorgan’s shares have lost 7.5% in the past 12 months compared with the industry’s decline of 10.3%.

Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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