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Friday, 20 July, 2001, 15:49 GMT 16:49 UK
HSBC buys insolvent Turkish bank
An HSBC sign in London
HSBC will use Demirbank to boost its Turkish unit
HSBC Holdings has become the first foreign investor to buy a bank seized by the Turkish government because of insolvency.

The UK bank said on Friday it had received confirmation from the Banking Regulatory & Supervisory Agency of Turkey (BDDK) that its offer for Demirbank was successful.

The sale is part of Turkey's pledge to the International Monetary Fund (IMF) to restructure the troubled banking system, which is seen as the main cause of its financial crisis, in return for a $15.7bn bail-out deal.

"The bank has agreed to purchase the legal entity of Demirbank and has selected certain assets and liabilities to produce a balance sheet of approximately $1.35bn," HSBC said in a statement.

HSBC said it would merge the country's ninth largest bank with its existing Turkish unit to create an institution with assets of about $2.35bn and capital of $250m.

Turkish delight

The panic that has recently gripped the country's financial markets began to ease on Tuesday with the resignation of Enis Oksuz, the minister for transport and communications and a key opponent of IMF activities in Turkey.

Banking Regulatory and Supervisory Agency of Turkey (BDDK)
BDDK has another 17 banks to sell or close
Since then, the government has restated its commitment to the programme.

Demirbank, one of 18 failed banks in government receivership, was the one considered mostly likely to be sold.

So far, rehabilitating the failed banks has cost Turkey billions of dollars.

The BDDK has promised the IMF it will sell or close all the banks it controls by the end of this year, and has already merged some of the banks in preparation for sale.

Demirbank assets

Demirbank, established in 1953, has about 200 branches, $3bn in deposits and some 650,000 retail customers.

It offers a full range of financial services including online banking, ATMs, and call centres.

Demirbank, which was taken into administration by the BDDK in December 2000, was listed on the Istanbul, Munich and Frankfurt stock exchanges and has an ADR registration in the US.

Neither HSBC nor the agency indicated for how much Demirbank had been sold.

Turkish newspapers cited banking sources as saying a price of between $300m and $350m was being paid.

HSBC also has substantial operations in the Arab world through HSBC Bank Middle East, formerly known as British Bank of the Middle East.

See also:

13 Jul 01 | Business
Turkey cheers loan resumption
02 Jul 01 | Business
IMF puts off key Turkish loan
15 May 01 | Business
IMF set to approve $10bn for Turkey
22 Feb 01 | Business
Turkish banks at root of crisis
22 Feb 01 | Business
Turkey currency plunge
02 Mar 01 | Business
World Bank man to Turkish 'rescue'
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